Spending Climbs in October; Constructconnect, Dodge Report Mixed Results for 2025 Starts

By KEN SIMONSON

Construction spending (not adjusted for inflation) totaled $2.18 trillion in October at a seasonally adjusted annual rate, up 0.5 percent from September but down 1.0 percent year-over-year (y/y), the Census Bureau reported on Jan. 21. Private residential construction rose 1.3 percent for the month but slipped 1.3 percent y/y. The monthly gain was largely attributable to a 4.5 percent jump in residential improvements (additions and renovations to owner-occupied housing), an estimate often subject to large revisions. Single-family homebuilding declined 1.3 percent for the month, while multifamily construction dipped 0.2 percent. Private nonresidential spending fell 0.2 percent for the month and 2.6 percent y/y. The largest private nonresidential segment—manufacturing construction—declined for the ninth month in a row, by 0.9 percent for the month and 9.7 percent y/y. Commercial construction rose 0.2 percent for the month (comprising warehouse, up 1.0 percent; retail, down 0.7 percent; and farm, up 0.1 percent). Private “office” construction fell 0.4 percent in October (comprising data centers, up 1.2 percent, and other, down 1.8 percent). Public construction spending rose 0.1 percent for the month and 2.1 percent y/y. Spending on the three largest public segments varied for the month: highway and street rose 0.1 percent, educational rose 0.7 percent, and sewage and waste disposal dipped 0.1 percent.

The value of construction starts, not seasonally adjusted, rose 3.1 percent y/y in December and 8.2 percent for the full year compared to 2024, ConstructConnect reported on Friday. Nonresidential building starts climbed 17.5 percent y/y and 18.5 percent for the year, with commercial up 45 percent y/y, institutional down 15 percent, and industrial (manufacturing) up 18 percent. Engineering (civil) starts rose 32 percent y/y and 8.6 percent for the year, with roads up 24 percent y/y, water and sewage treatment down 17 percent, bridges down 45 percent, airports up 405 percent, and miscellaneous (power, etc.) up 220 percent. Residential starts slumped 38.5 percent y/y and 7.0 percent for the year, with single-family down 22 percent y/y and apartments down 62 percent.

Total construction starts rose 2.6 percent from November to December at a seasonally adjusted annual rate, Dodge Construction Network reported on Friday. “Nonresidential building starts fell by 6.6 percent, residential starts increased 1.0 percent, and nonbuilding starts grew 16.3 percent over the month. For the full year, total construction starts expanded 5.4 percent. Nonresidential starts were up 4.5 percent, residential starts were down 4.8 percent” and nonbuilding starts were up 18.7 percent. Commercial starts were up 9.8 percent over the month, alongside growth in offices and data centers (+7.4 percent), parking garages (+39 percent), hotels (+74.4 percent), and warehouses (+0.7 percent). There were declines for month in retail starts (-12 percent) and institutional starts (-16 percent), “driven by weaker education (-18.2 percent) and miscellaneous institutional (-26.9 percent) starts. This decline was partially offset by 7.9 percent growth in healthcare facility starts. Manufacturing, meanwhile, pulled back” 31 percent for the month. Highways and bridges (+85 percent) and miscellaneous nonbuilding (+36 percent) supported growth, while environmental public works (-27 percent) and electric power/utilities (-9.0 percent )” declined for the month.

Housing starts (units) in October slumped 4.6 percent for the month at a seasonally adjusted annual rate and slipped 0.7 percent for the first 10 months of 2025 YTD compared to January-October 2024, the Census Bureau reported on January 9. Single-family starts rose 5.4 percent for the month but fell 7.0 percent YTD. Multifamily (five or more units) starts skidded 26 percent from September but jumped 18 percent YTD. Residential permits fell 0.2 percent for the month and 3.0 percent YTD. Single-family permits slipped 0.5 percent from September and 7.0 percent YTD. Multifamily permits climbed 0.4 percent from September and 2.6 percent YTD. The number of multifamily units under construction rose 0.3 percent from September but tumbled 13 percent y/y.

The Architecture Billings Index (ABI) rose to 48.5 in December, seasonally adjusted, from 45.3 in November but remained below the breakeven 50 mark for the 14th month in a row and for 36 of the last 39 months, the American Institute of Architects posted on Wednesday. The index is “a leading economic indicator of construction activity, providing an approximately 9- to 12-month glimpse into the future of nonresidential construction spending activity.” The ABI is derived from the share of responding architecture firms that report a gain in billings compared to the previous month less the share reporting a decline in billings, presented on a 0-to-100 scale. Any score below 50.0 indicates decreasing business conditions. Readings remained below 50 for all types of practices: institutional, 48.7; commercial/industrial, 47.8; multifamily residential, 45.5; and mixed, 44.0. “This month, 90 percent of responding firm leaders reported that they have had projects that have been significantly delayed over the past six months, 84 percent have had projects that have gone on hold/indefinitely stalled, and 71 percent have had projects that were canceled/abandoned.”

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Ken Simonson is chief economist for the Associated General Contractors of America.