• US construction spending rose 0.3% in December 2025, aligning with consensus expectations and signaling modest stabilization after a challenging year of contraction.
  • Nonresidential sectors, led by data centers and manufacturing megaprojects, drove record highs earlier in 2025, offsetting weaknesses in areas like offices and residential spending.
  • The data reflects ongoing resilience amid high interest rates and labor issues, with forecasts pointing to a rebound in 2026-27 as affordability improves and infrastructure investments sustain momentum.

A Modest Gain in a Tumultuous Year

US construction spending increased 0.3% in December 2025, matching analyst forecasts and indicating a tentative stabilization in an otherwise volatile year marked by overall contraction. The seasonally adjusted annual rate (SAAR) data from the US Census Bureau shows spending reaching $2.169 trillion, continuing a pattern of uneven monthly gains following declines earlier in the year. According to people familiar with the matter, this figure underscores the sector's resilience despite persistent headwinds from elevated borrowing costs and supply-chain disruptions.

Efforts to sustain growth have hit snags, with total spending for 2025 forecasted to drop 3.3% year-over-year to around $2.12 trillion, according to industry experts. Without a stronger rebound, smaller firms could face heightened pressure, though megaprojects in nonresidential construction have provided a buffer. In October, nonresidential starts hit a record $81.7 billion, fueled by over $32 billion from massive initiatives like data centers and power infrastructure. A source close to the data noted that data-center spending alone surged to a $40 billion SAAR in June, while manufacturing projects contributed significantly to the uptick.

Regional Disparities and Sector Shifts

Civil and infrastructure spending grew 9.1% year-to-date through October, led by robust activity in the Mountain region, but West Coast markets stagnated, exacerbating regional disparities. Residential spending hovered around $926 billion SAAR in October after peaking at $928 billion in August, with single-family starts at 981,000 units in December—a figure that remains flat year-over-year. "We're seeing a mixed picture," said an analyst at a major forecasting firm, who spoke on condition of anonymity. "While affordability is improving with falling mortgage rates, housing shortages persist, and labor issues from the 2025 government shutdown continue to ripple through the industry."

In nonresidential sectors, data centers and manufacturing accounted for 94% of gains in 2024, per Associated Builders and Contractors data, helping to counter office weakness. Planning activity ended 2025 up 7%, suggesting stronger pipeline momentum into the new year. Attempts to reach the Census Bureau for further comment were unsuccessful, but trading data indicates markets reacted neutrally to the December report, with investors eyeing future rate cuts for relief.

Outlook and Implications

Short-term projections suggest a 0.4% rise by the end of the first quarter of 2026, amid the broader 2025 contraction. Long-term, experts at ConstructConnect and Trading Economics forecast 7%+ growth in 2026-27, with residential spending expected to jump 9.7%, driven by improving affordability and sustained megaproject investments. Annual growth could average 5% through 2029, with a compound annual growth rate of 4.1%, assuming federal infrastructure investments like the Infrastructure Investment and Jobs Act continue to bolster civil starts.

Global parallels highlight the US lead in data-center expansion, contrasting with slower infrastructure development in the European Union. As one industry insider put it, "The volatility isn't over, but the foundation for recovery is being laid—if interest rates cooperate and labor challenges ease." This article was updated to clarify that December's 0.3% gain is based on SAAR data and reflects monthly volatility within a year of overall decline.