Weakness is broadening beyond a single segment, according to ABC. Spending declined in nine of 16 nonresidential categories in January, including commercial, water supply, educational and amusement-related construction, alongside a sharper drop in manufacturing.

“Private nonresidential construction spending contracted for the fourth consecutive month in January and is now down 8% from the December 2023 all-time high,” said ABC Chief Economist Anirban Basu.

Manufacturing remains the central pressure point. Spending tied to computer and electronic manufacturing—previously buoyed by CHIPS Act-incentivized megaprojects—has fallen off as those projects wind down. “With CHIPS Act-incentivized megaprojects wrapping up, spending in that subcategory is down nearly 40% over the past 18 months,” Basu said.

The pullback follows an unprecedented surge in manufacturing construction tied to semiconductor and advanced manufacturing investments over the past several years, much of it driven by federal incentives. As those megaprojects move from peak construction into commissioning and completion phases, spending is beginning to normalize.

That retrenchment is now visible in the broader data. Manufacturing spending fell 2% in January and is down 15% year over year, while private nonresidential construction overall has declined 3% over the past 12 months. 

By contrast, public nonresidential construction is up 4.5% year over year, underscoring the stabilizing role of infrastructure and other government-funded projects.

U.S. nonresidential construction spending climbed steadily from 2015 through a surge in 2022–24 before leveling off into early 2026, reflecting a cooling private sector as manufacturing activity retreats, according to U.S. Census Bureau data analyzed by Associated Builders and Contractors.

Source: Associated Builders and Contractors

Data centers continue to stand apart as the primary area of private-sector expansion. Spending in that segment rose another 2% in January, Basu said, but remains insufficient to counterbalance the decline in manufacturing activity.

Elsewhere, performance is uneven but not uniformly weak. Highway and street construction and conservation-related work posted monthly gains, and transportation spending remains positive year over year, suggesting that infrastructure programs are still supporting activity even as private development cools.

Basu warned that external pressures could further tighten conditions in the months ahead. He cited the ongoing conflict in Iran as a factor likely to drive materials price escalation and increase uncertainty for contractors already contending with a softening private pipeline.

Forward-looking indicators point to limited, near-term relief. ABC’s Construction Backlog Indicator edged up 0.1 months in February from January’s four-year low, a marginal improvement that still leaves contractors with thin project visibility entering the back end of the first half of 2026.

For contractors, the near-term outlook is increasingly shaped by that divergence: firms tied to publicly funded infrastructure and data center development continue to see opportunities, while those dependent on manufacturing and other private nonresidential sectors face a thinner pipeline as project starts slow and backlog remains near recent lows.

Nonresidential construction spending was flat in January 2026, with declines in nine of 16 categories and a 2% monthly drop in manufacturing, while public-sector spending rose 0.6%, according to U.S. Census Bureau data analyzed by Associated Builders and Contractors.

Source: Associated Builders and Contractors