US nonresidential construction spending was largely unchanged in January, but continued weakness in private-sector activity signals growing pressure on the construction outlook, according to analysis from the Associated Builders and Contractors (ABC).
Total nonresidential spending held steady at a seasonally adjusted annual rate of $1.245 trillion in January, based on data from the U.S. Census Bureau.
Despite the stable headline figure, underlying trends point to a softening market. Spending declined in nine of the 16 nonresidential subcategories during the month, with private construction continuing to contract.
Private nonresidential spending fell 0.4% in January, marking the fourth consecutive monthly decline. In contrast, public nonresidential construction rose 0.6%, helping to offset broader weakness.
“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 Anirban Basu, chief economist at ABC.
Manufacturing slowdown drives weakness
The downturn in private construction has been driven largely by a sharp pullback in manufacturing activity, particularly in computer and electronic facilities.
According to Basu, spending in that segment has fallen by nearly 40% over the past 18 months as projects supported by the CHIPS Act near completion.
“While harsh winter weather likely bears some blame, the major issue is the ongoing decline in computer/electronic manufacturing construction,” he said.
The contraction in manufacturing has left few areas of strength across private nonresidential construction.
Data centers remain a bright spot
One notable exception is data center construction, which continues to expand amid rising demand tied to digital infrastructure and artificial intelligence.
Spending on data centers increased by a further 2% in January, providing one of the only consistent sources of growth within the private nonresidential segment.
“With the exception of data centers, there are few sources of momentum to offset the precipitous decline in manufacturing construction activity,” Basu said.
Rising risks cloud near-term outlook
Looking ahead, ABC warned that broader economic and geopolitical risks could further weigh on construction activity in the coming months.
The ongoing conflict in Iran is expected to contribute to higher materials costs and increased uncertainty, adding pressure to an already fragile market environment.
While ABC’s Construction Backlog Indicator showed a slight improvement in February, rising by 0.1 months from a four-year low in January, the outlook for contractors remains challenging.
“It may be a difficult first half of 2026 for many contractors,” Basu said.
The latest data underscores a widening divergence in the construction sector, with public investment and data center activity providing support, while private nonresidential construction—particularly manufacturing—continues to lose momentum.