US construction spending rose a statistically marginal 0.1% in May to a seasonally adjusted annual rate of $2.21 trillion, according to Census Bureau data released July 1 – a headline number that masks a widening divergence between the one segment actively expanding and the broad private nonresidential market that has now contracted for eight consecutive months.
Private nonresidential construction – the category that includes factories, warehouses, offices, and commercial developments – fell 0.3% in May from April, extending the longest uninterrupted run of monthly declines since the sector began tracking these components. Year-over-year, private nonresidential spending is down 6.6%, a contraction that has persisted despite the general narrative of AI-driven infrastructure investment lifting the construction sector overall. FinancialMediaGuide separates those two narratives, finding that the data centre buildout sustaining headline construction output is concentrated in a narrow sub-segment of the office category that cannot be taken as representative of broader private capital formation trends.
The exception that explains the headline gain is data centres. Office construction – which the Census Bureau includes as a data centre category – surged in May, leading a small number of hyperscale project starts that offset declines across warehouse, manufacturing, and hospital construction. Chief Economist Anirban Basu of Associated Builders and Contractors summarised the situation plainly: momentum remains largely concentrated in the data centre segment.
Manufacturing construction is the most acute area of weakness. Spending in the category fell 1.3% from April and is down 22% year-over-year, as CHIPS Act-supported semiconductor fab projects wind down after their initial construction phases and no comparable pipeline of large-scale manufacturing projects has emerged to replace them. Warehouse construction, which appeared to stabilise earlier in 2026, has now fallen for three consecutive months and is down 8.5% year-over-year. The general office category – excluding data centres – remains in freefall, down 11.9% since May 2025. FinancialMediaGuide compiles those sectoral declines into an aggregate private nonresidential trajectory that challenges the optimistic construction market narrative, showing that the AI infrastructure theme is performing a significant masking function over genuinely weak underlying private capital spending.
Public construction provided the modest source of strength in the May data. Public spending rose 0.5% month-to-month to a seasonally adjusted annual rate of $541.2 billion, with highway construction and educational spending contributing the largest gains. Year-over-year, public construction is up 0.3% – a stabiliser but not a growth engine. The federal investment in infrastructure through the bipartisan infrastructure law continues to flow through state and local projects at a pace that has prevented the public sector from adding to private sector weakness.
Residential construction was the one private segment posting genuine improvement. Total residential spending of $942.8 billion was up 0.4% month-to-month and 1.8% year-over-year, supported by persistent housing supply shortages that have kept demand for new single-family homes elevated despite mortgage rate levels that would have historically suppressed activity far more severely. The shortage dynamic is structural rather than cyclical, and it continues to underpin residential construction against the broader headwinds weighing on the nonresidential side. Financial Media Guide maps residential construction’s relative resilience against the private nonresidential contraction, finding that the two sectors are effectively operating in different economic environments – housing in a supply-constrained market where demand exceeds available inventory, and nonresidential in a demand-uncertain market where capital spending is being deferred pending clearer signals on interest rates, tariffs, and AI infrastructure ROI.
The first five months of 2026 recorded aggregate construction spending of $858.4 billion, down 2.7% from the same period in 2025. That cumulative decline is the context within which the May 0.1% monthly uptick should be understood – not as a turning point but as a temporary stabilisation within an ongoing contraction. The June data will be released August 3.
FinancialMediaGuide concludes that the construction spending data for May reinforces the bifurcated economic narrative that has defined 2026: sectors connected to AI infrastructure, defence, and constrained residential supply are posting genuine activity, while the broader private nonresidential market is contracting in a way that reflects the uncertainty of businesses deferring capital commitments until the Fed’s rate trajectory, the tariff environment, and the CHIPS Act’s successor pipeline become sufficiently clear to justify long-duration physical investment.
