Construction Spending Slips in January With Threat of Tariffs Looming
Construction spending decreased 0.2% from December to January as the industry poised for the potential impacts of proposed tariffs.
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| The Associated General Contractors of America is cautioning of potential spending decreases due to the new tariffs. |
The report comes from analysis of federal data by the Associated General Contractors of America.
Association officials have cautioned members that spending on new construction projects could be negatively impacted by the new tariffs on a range of goods from Canada, Mexico and China that are likely to make projects more costly.
Citing concern for the price increases, AGC is urging the Trump administration to quickly resolve underlying disputes with the three trade partners which are prompting the new tariffs.
“We all want to see more domestic suppliers of construction materials, but undermining demand for construction isn’t the right way to stimulate new domestic capacity,” said Jeffrey H. Shoaf, AGC’s chief executive officer. “Higher interest rates are making it harder to get private sector projects approved, and these new tariffs are likely to prompt many developers to hit pause on new projects.”
Spending totaled $2.19 trillion at a seasonally adjusted annual rate in January. The total was 0.2% below the December rate and 3.3% above the January 2024 level.
Ken Simonson, AGC chief economist, noted that construction spending increased at a 6.6% rate in 2024 as a whole, twice as fast as the latest year-over-year increase.
“Construction spending growth has been slowing under pressure from high interest costs and now the prospect of new waves of tariffs,” Simonson said. “There have already been notable cancellations and postponements for major manufacturing plants and the impacts of new tariffs are likely to lead to more delays and cancellations.”
Manufacturing construction spending declined 0.3% in January and the year-over-year growth slowed to 5.6% from 20% in 2024. Simonson noted that last week alone, Air Products pulled out of three planned projects and Intel pushed out completion of its $28 billion Ohio project from 2026 to 2031.
Also, educational construction fell 0.6% from December; multifamily construction dropped 0.7%; and private office construction declined 0.5%.
These and other contractions outweighed the increases found in single-family homebuilding, which rose 0.6%, data center construction, which climbed 1.9 and gains in several infrastructure sectors.
Highway and street construction spending rose 0.6% for the month, sewage and waste treatment outlays increased 0.4%; and spending on transportation facilities edged up 0.1%.
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