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June 2, 2025

Construction spending dropped 0.4% in April, the third consecutive monthly decline. Compared to a year ago, spending is down 0.5%; the figure is not adjusted for inflation. Prices of inputs to construction industries were up 0.7% over the period, suggesting even larger inflation-adjusted losses. The industry is in the crosshairs of changes to both trade and immigration policy, which is pushing up costs.

Private residential construction fell 0.9% as rising mortgage rates and souring consumer attitudes dampened demand. Builders have been pessimistic about future conditions and have pulled back from new construction as they work through excess inventory; single-family home construction dropped 1.1% in April, the first decline since August 2024.

Multifamily construction slipped 0.1% while lower permits signal not much apartment construction ahead. New tenant rents are falling, especially in markets that have seen a record level of new units. The weakness in rents will be short-lived due to the lack of new construction and high levels of absorption across markets. Apartment absorptions have risen in every major market for the first time since 2001. That will leave us tight on inventories and could trigger a rebound in rents by year-end.

Private nonresidential construction fell 0.5%; losses were broad-based. Smaller spending categories like transportation, amusement and recreation and educational structures formed the only bright spots in the month. Data center construction, which is recorded under the office category, eked out a modest 0.2% gain but rose to a record high.

Manufacturing facilities for computers and electronics have lost momentum for nine out of the last 11 months. Spending fell again in April to the lowest level since December 2023. This is where spending on new semiconductor facilities shows up.

Public construction spending rose 0.4% in the month, driven by a 0.3% gain at the state and local levels. The bulk of infrastructure spending occurs at the state and local levels often via transfers from the federal government, which are slowing.