Construction spending sinks overall

September 1, 2026

Construction spending fell 0.5% in July to a seasonally adjusted annual rate of $2.16 trillion, from a June figure that was revised lower. Spending is now 3.8% below year-ago levels, the 12th consecutive month falling below year-ago levels. (The data are not adjusted for inflation.)

Adjusted for costs, the decline in spending is even steeper. Input prices for new construction have risen 7.2% over the past year, not including labor costs. Diesel is the pressure point; prices neared record highs in late August and the July producer price index showed prices up 44% from a year ago; increases are being passed through to customers quickly as surcharges. Because many materials move to sites by truck, diesel lifts the delivered cost of construction even when some materials have not moved. 

Strong demand is bumping up against tariffs to keep metals prices elevated. Aluminum is enduring some of the largest increases due to capacity problems and is up 40% from a year ago; steel is up 22% and copper up 18% over the same time. Copper sits near record highs as a mine outage collides with the demand from the AI buildout. Costs are climbing while spending falls. Real construction activity is contracting. 

Private residential construction led the decline, falling 1.3% in July and 7.3% from a year ago. Spending on new single-family homes dropped 3.2%, the weakest reading since June 2023. It's off 6.5% from a year ago. Single-family home building is not expected to recover while mortgage rates are elevated. Builders continue to move down the price ladder to reach entry-level buyers. Sales incentives are running at 63% now. Builder sentiment has been pessimistic for 16 consecutive months, the longest stretch since 2012, not long after the housing bust. Multifamily spending edged up 0.2% in July but remains below year-ago levels, as new supply is bringing down rents.

Private nonresidential spending rose 0.4% in July but fell 3.3% from a year ago. Architecture billings have contracted for nearly three and a half years, the longest stretch on record and a leading indicator for nonresidential construction; that's according to the American Institute of Architects.

Manufacturing construction fell another 0.8%; it's down 22% year-over-year, extending a retreat that started two years ago. Manufacturing had been the largest nonresidential category for years. It is facing increased competition from power related to data center demand. On a combined public and private basis, power construction now stands at $181.5 billion against manufacturing's $169.8 billion; the gap is widening. In July, private power infrastructure spending increased 0.5%, amounting to 6.5% from a year ago. 

Data centers remain the structural growth driver. Spending reached a record $75.2 billion, up 6.2%, 57% on the year. That's the strongest growth in any category. Data center construction represents the physical footprint of an AI capital cycle that official data likely understate. Hyperscaler guidance now tops $800 billion for the year while the run rate for data center construction and equipment is approaching $1 trillion, against a little under $400 billion captured in the second-quarter national accounts. 

Strip out data centers and the power to feed them and nonresidential construction contracts. Reliance on data centers to support construction places the sector on a shaky footing. Longer interconnection queues, rising energy costs and increased local opposition dictate how fast projects move, or if they move at all. Three-quarters of voters now say they do not want a data center in their community. States including Texas, Pennsylvania and Ohio are increasing scrutiny.  That means the greater risk to the buildout is in 2028 and beyond. 

Public construction slipped 0.2% in July and but added 1.7% from a year ago. Highway and street construction, the largest public category, edged down 0.2%. Educational construction dropped 0.2% but eked out a 0.4% gain over the year. Public power spending fell from a year ago, a contrast to the private side.