In April, the nonresidential construction sector witnessed a slight decline, with spending dropping by 0.1% to reach an annual rate of $1.248 trillion, as per an analysis by Associated Builders and Contractors based on U.S. Census Bureau data. This downturn was more pronounced in private nonresidential construction, which fell by 0.5%, while public nonresidential projects saw a modest 0.5% increase. Factors such as tariff-related disruptions and financing difficulties have significantly impacted project demand, contributing to delays or cancellations reported by a significant percentage of contractors.

The challenges facing the construction industry are multifaceted. Tariff uncertainties, fluctuating interest rates, and stringent lending conditions have all contributed to a decline in construction spending for two consecutive months. According to Ken Simonson, AGC chief economist, the decrease in private nonresidential projects and a notable drop in homebuilding have been pivotal in this trend. Trade policy announcements and potential retaliatory measures from international trading partners have further deterred investors from committing to new projects.

This downward trend is not isolated; private nonresidential investment has fallen in three out of the first four months of 2025, indicating a possible 4% annual decline. While data centers and certain public infrastructure projects remain stable growth areas, other sectors, particularly manufacturing, have begun to show signs of cooling. Anirban Basu, ABC chief economist, highlighted that despite adjustments to import tax rates in May, policy uncertainty remains a major obstacle for the industry.

On a brighter note, public construction continues to bolster overall spending figures. Public nonresidential spending increased by 0.5% in April and remains up by 5.6% compared to the previous year. Transportation, highway, and street projects have been leading this growth, although educational spending has remained stagnant. Jeffrey Shoaf, AGC CEO, emphasized the need for greater certainty regarding costs and demand expectations to prevent further declines in private construction, which could hinder economic growth and competitiveness.

As uncertainties persist, the construction industry faces a critical juncture. The interplay between trade policies, financial conditions, and project demand will continue to shape the trajectory of construction spending. Without clearer cost projections and stable market conditions, the sector risks prolonged stagnation, affecting broader economic prospects.