By KERRY SMITH BUCK
Construction economics analyst Ed Zarenski says the latest data shows construction spending is down seven out of the past nine months.
The -3.5 percent (-6.5 percent as adjusted for inflation) dip since nine months ago is largely due to a fall-off in residential building, Zarenski adds.
“Residential spending peaked in October 2024. Since then it’s down 10 percent or $90 billion nationally,” he says. “Warehouse construction is down -12 percent ($8 billion). Manufacturing is down only 6 percent ($15 billion).
Data center construction continues to buoy non-residential construction, according to Zarenski. This sector is on track to gain 32 percent ($10 billion) in 2025 and 31 percent ($13 billion) in 2026.
“When spending is up by just a little, it looks like we are making progress,” Zarenski says. “But we are always fighting inflation. If spending is up by 3 percent but inflation is at 4 percent, then real business volume declined by 1 percent. If spending is down 5 percent with 3 percent to 4 percent inflation, business volume is down 8 percent to 9 percent.”
Cooled market confidence is also impacting the industry’s spending, according to a report released 90 days ago from the Construction Industry Round Table and market research firm FMI. The report’s findings indicate a sharp drop in industry confidence during the second quarter, driven largely by rising material costs from new tariffs and uncertain trade tensions with countries like China.