Construction Spending Dips 0.3 Percent In January As Weakness In Private Residential And Nonresidential Investment Offsets Public Outlay Gains 

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Construction spending slipped 0.3 percent from December to January as declines in both private residential and nonresidential activity outweighed gains in public construction, according to an analysis of a new government report that the Associated General Contractors of America. Association officials noted that the data highlights the continued impact of economic uncertainty on construction demand.

“Rising construction costs and uncertainty over the impact of tariffs, war in the Middle East, and a slowing economy are leading to slowdowns and cancellations of many project types,” said Ken Simonson, the association’s chief economist. “Aside from investment in data centers and residential improvements, other private construction categories have been slumping for the past year.”

Construction spending totaled $2.190 trillion at a seasonally adjusted annual rate in January. That figure is 0.3 percent below the revised December rate and 1.0 percent above the January 2025 level. Private construction spending declined 0.6 percent for the month and was essentially flat compared to a year ago. On a year-over-year basis, residential construction rose 2.3 percent, buoyed by a 12.5 percent jump in improvements and an 0.4 percent rise in multifamily outlays, which offset a 5.8 percent drop in single-family construction.

Private nonresidential construction slipped 0.4 percent for the month and was 3.0 percent lower than in January 2025, despite a 31.3 percent leap in data center construction with several key segments continuing to soften. Notably, the largest category, manufacturing construction, tumbled 15.0 percent year-over-year. Private office construction (excluding data centers) slumped 13.0 percent over the past 12 months.

Public construction spending increased 0.6 percent for the month and 4.5 percent year-over-year, helping to offset weakness in private activity. Among the largest public segments, highway and street construction rose 4.1 percent over the past year, while education construction edged up 0.3 percent year-over-year. Public transportation construction increased 5.0 percent compared to a year ago. Association officials said that while public sector investments continue to support construction activity, ongoing uncertainty around trade policy, financing conditions, and labor availability is weighing on private sector demand.

“Private and public sector construction owners are continuing to navigate significant uncertainty around tariffs, escalating geopolitical risks, and volatile material costs, alongside ongoing labor market constraints,” said Jeffrey D. Shoaf, the association’s chief executive officer. “With public investments continuing to support activity, federal officials should take steps to provide greater certainty for private sector investors. That includes resolving trade disputes, stabilizing material costs, and expanding the construction workforce through targeted workforce development investments.”