Many other segments, however, are held back by high interest rates and by high materials costs, causing an overall 3.8% decline in construction spending year-over-year as of May 2026. Manufacturing dropped 21.9%, which Basu attributed to the nearing expiration of the Biden-era CHIPS and Science Act which provided subsidies in this sector for the past several years. Hotel construction also dropped, at a rate of 10.7%. “Hotel occupancy is up, and hotel construction is down,” said Basu, due to high labor and material costs.

Overall, material costs have risen 55.5% since Feb. 2020, the last month before the COVID-19 pandemic. This is largely due to more recent events, such as the conflict in Iran, causing crude petroleum and crude energy materials prices to soar, at a rate of 128.5% and 116.4%, respectively. Tariffs also played a significant part, as nonferrous wire and cable prices rose 91.4% and steel mill products experienced a 86% jump in prices.

For the remainder of 2026, “I think there’s enough demand between artificial intelligence [and] corporate investment … to keep the U.S. economy going from a top line GDP perspective, but there are some real risks out there, including for construction,” said Basu, particularly an interest rate hike in 2027.