Construction spending in the United States has continued its downward trend, decreasing by 0.3 percent from April to May and showing a significant 3.5 percent decline over the past year, marking the largest yearly drop since February 2019. This analysis was provided by the Associated General Contractors of America based on a recent government report.
Ken Simonson, chief economist for the association, commented on the situation: “Uncertainty about tariffs, tax rates and labor availability are making it hard for many developers to risk moving forward with planned construction projects.” He noted that while public sector demand remains steady, it is not enough to counterbalance the reductions in private sector activity.
In May, construction spending reached $2.14 trillion at a seasonally adjusted annual rate, which is 0.3 percent lower than April's revised rate and down by 3.5 percent compared to May 2024. The decline follows previous decreases of 0.2 percent in April and 0.7 percent in March.
Private nonresidential construction saw a decrease of 0.4 percent for the month and a year-over-year decline of 3.9 percent, marking nine consecutive years of reduction in this category. Spending on manufacturing plants fell by 0.1 percent in May, while private power construction dropped by 0.6 percent and commercial construction decreased by 0.8 percent.
The private residential sector also experienced declines, with a monthly decrease of 0.5 percent and an annual drop of 6.7 percent from May 2024 figures. Single-family homebuilding fell by 1.8 percent; however, there was a slight increase of 0.9 percent in spending on improvements to owner-occupied homes, while multifamily construction remained unchanged.
Public construction increases mitigated some of these declines with an overall rise of 0.1 percent from April and an increase of 3.3 percent from May last year. Among major public categories, highway and street construction decreased by 0.3 percent in May; educational structures spending increased slightly by 0.1 percent; transportation facilities saw an increase of 0.6 percent.
The association urged Congress and the Trump administration to address market uncertainties affecting private sector investments by passing legislation that would prevent significant tax hikes on construction firms and resolve ongoing trade disputes leading to proposed tariffs.
Jeffrey D. Shoaf, CEO of the association emphasized: “The more certainty there is in the market, the more likely private sector developers will greenlight planned construction projects.” He called for clear tax policies, resolution of trade issues, investment in construction education and training programs as well as legal pathways for foreign workers to join the U.S workforce.