Nonresidential construction spending declined 0.6% in December, with manufacturing and water supply each down 2.5% for the month, according to U.S. Census Bureau data analyzed by Associated Builders and Contractors.

Manufacturing posted the steepest losses. At a $202.4-billion seasonally adjusted annual rate in December, manufacturing-related construction spending is down nearly 16% from its August 2024 all-time high, according to the Census data as analyzed by ABC. Anirban Basu, ABC’s chief economist, sees little near-term relief.

"Given trade policy uncertainty and the waning effects of the CHIPS Act, manufacturing-related spending will likely continue to decline over the next several quarters," Basu said in a statement.

The slowdown was not confined to industrial work. "Eight of the 11 private nonresidential subsegments contracted in December, and total private nonresidential spending is now down 1.8% year over year," Basu said. "Given this weakness, it is unsurprising that ABC's Construction Backlog Indicator fell to a four-year low in January."

Water supply and manufacturing each declined 2.5% in December, the sharpest monthly drops among major segments. Power was the standout gainer, rising 0.8% for the month and 5.8% year-over-year.

The December pullback in spending stands in contrast to renewed movement on the cost side.

Materials Prices Rebound in January

Construction input prices increased 0.7% in January — a 7.1% annualized pace — according to ABC's analysis of U.S. Bureau of Labor Statistics Producer Price Index data released the same day. Nonresidential construction input prices rose 0.6% for the month and are up 2.9% year over year.

Construction input prices rose 0.7% in January, while nonresidential inputs increased 0.6%, led by gains in copper wire and cable, iron and steel, and steel mill products, according to U.S. Bureau of Labor Statistics data analyzed by Associated Builders and Contractors.

Copper wire and cable led commodity gains, rising 5.0% in January and 27.3% over the past year. Iron and steel increased 2.2% for the month and 15.5% year over year. Softwood lumber climbed 3.9% in January, though it remains down 2.8% compared with a year earlier. Natural gas prices fell 2.9% for the month.

Basu cautioned against overinterpreting the monthly spike, attributing much of the increase to tariff-affected products. "While this sharp monthly rise can be traced to significant increases in prices for tariff-affected products like copper wire and cable, iron and steel, and industrial controls equipment, aggregate input price escalation is not particularly concerning right now," he said. "Nonresidential materials prices are up just 2.9% over the past year and have been virtually flat over the past several months, rising just 0.2% since September despite some large monthly fluctuations."

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"Trade policy may continue to put upward pressure on certain input prices, especially those subject to the large Section 232 tariffs," Basu said. "Even so, input escalation is unlikely to rise too sharply as long as energy prices remain tame and demand remains subdued."

Contractor sentiment reflects that measured view. Profit margin confidence improved in January according to ABC's Construction Confidence Index, though it remains below year-ago levels.

The divergence between moderating demand and selective cost spikes may complicate project estimating—but it does not yet signal a broad inflation cycle.