Trade wars and shutdowns choke U.S. construction demand

A modest uptick in U.S. construction spending masks underlying weakness across most nonresidential sectors, with industry leaders attributing the tepid 0.2 percent monthly gain to economic uncertainty surrounding tariffs, government operations, and labor availability.

U.S. construction spending rose 0.2 percent from July to August, driven primarily by multifamily residential gains that offset weakness across most private nonresidential categories, according to data released by the Associated General Contractors of America.

The report, delayed due to the recent federal government shutdown, reveals an industry grappling with significant uncertainty. Construction spending totaled $2.169 trillion at a seasonally adjusted annual rate in August, marginally above July’s revised figure but 1.6 percent below year-ago levels.

“Private and public sector construction owners are clearly being impacted by uncertainty about federal funding, material prices, and labor supply,” said Macrina Wilkins, the association’s senior research analyst.

Ten of sixteen nonresidential categories posted monthly declines. The three largest segments all retreated: manufacturing construction fell 0.9 percent, while highway and street construction and power construction each slipped 0.2 percent. Private nonresidential spending declined 0.3 percent for the month and 4.0 percent year-over-year.

Data center construction provided a bright spot, surging 26 percent annually. Private residential spending gained 0.8 percent monthly but remained 2.0 percent below year-ago levels. Public construction spending held steady month-over-month while posting a 2.7 percent annual gain.

Industry officials attribute the tepid performance to unresolved U.S. trade disputes with Canada and Mexico, a contracting labor market, and the recently concluded government shutdown.

“With the government shutdown over and the administration continuing to resolve trade disputes, now is the time to focus on expanding the construction workforce,” said Jeffrey D. Shoaf, the association’s chief executive officer.