Construction spending plummets on tariff fears

Dive Temporary:

• Nonresidential construction spending fell 0.5% in March to a seasonally adjusted annual charge of $1.25 trillion, retreating from February’s record-setting excessive, in accordance with an Related Builders and Contractors evaluation of U.S. Census Bureau information launched Thursday.
• Spending declined in 11 of the 16 nonresidential subcategories, with personal nonresidential building dropping 0.8% and public nonresidential spending slipping 0.2%, in accordance with the report.
• Data centers remain the primary driver of personal building progress, whereas excessive borrowing prices, lending constraints and commerce uncertainty proceed to stall broader market activity, mentioned Anirban Basu, ABC chief economist.

Dive Perception:

Nonresidential construction spending tumbled in March after reaching an all-time excessive in February, with declines seen throughout almost all personal classes, mentioned Ken Simonson, chief economist of the Related Common Contractors of America.

“Media reviews and company bulletins counsel homeowners are hesitant to start out new tasks in mild of uncertainty over tariffs, authorities funding and different coverage upheavals,” mentioned Simonson. “Spending has slowed over the previous yr and as present tasks wind down, there could also be a number of months of declining building exercise.”

That warning is already materializing within the information, mentioned Basu. Even manufacturing building, a key progress space final yr, misplaced steam in March.

“Nonresidential building spending fell sharply in March, with declines unfold throughout nearly each personal subsector,” mentioned Basu. “Knowledge heart investments, which accounted for greater than 70% of the rise in personal nonresidential building spending between March 2024 and March 2025, are maybe the one remaining supply of business momentum.”

However, ABC information exhibits public nonresidential spending stays up 4.8% yr over yr, whereas personal nonresidential spending ticked up simply 1.6% over the identical interval.

“Given unprecedented financial uncertainty, spending is unlikely to rebound within the coming months,” mentioned Basu. “Whereas a majority of contractors surveyed in March have been nonetheless optimistic about their future gross sales, in accordance with ABC’s Building Confidence Index, sentiment is prone to falter as the results of tariffs start to lift enter costs and stall or cancel tasks.”

The general U.S. financial system shrank 0.3% within the first quarter as imports surged forward of Trump administration tariffs, in accordance with Commerce Division information. The drop marks the primary contraction because the first quarter of 2022.