Weekly Economic Update for the US Construction Industry

Last updated: 11 July, 2026

Update summary

• Total construction spending edged up 0.1% in May 2026 from April but remains 1.5% below May 2025 levels (U.S. Census Bureau, 1 July 2026).
• Residential construction spending rose 0.4% month-over-month, supported by steady demand despite modest declines in new home sales and starts (U.S. Census Bureau, 1 July 2026; Federal Reserve Beige Book, 3 June 2026).
• Nonresidential construction spending was flat in May, with ongoing activity in infrastructure, health care, and data centers offset by softness in commercial and lodging sectors (U.S. Census Bureau, 1 July 2026; Federal Reserve Beige Book, 3 June 2026).
• Building materials costs and delivery expenses continue to rise sharply, pressuring margins and slowing growth expectations for new home building (Federal Reserve Beige Book, 3 June 2026).
• Credit conditions remain stable but cautious, with some downward pressure on lending rates due to competition, while loan delinquencies have increased slightly (Federal Reserve Beige Book, 3 June 2026).

The latest official data for May 2026 shows a modest increase in total U.S. construction spending, driven primarily by residential and public sector gains. However, total spending remains below year-ago levels, reflecting ongoing challenges in nonresidential markets and broader economic uncertainty. Rising costs for building materials and delivery, combined with cautious credit conditions, continue to shape the operating environment for contractors and developers.

What changed in the latest economic data?

According to the U.S. Census Bureau’s July 1 release, total construction spending in May 2026 was estimated at a seasonally adjusted annual rate of $2.21 trillion, up 0.1% from April but down 1.5% compared to May 2025. Residential construction spending increased 0.4% month-over-month to $942.8 billion, while nonresidential spending was essentially flat at $1.27 trillion, with slight declines in lodging and commercial sectors offset by small gains in office, educational, and health care construction. Public construction spending rose 0.5%, led by educational and highway projects.

What this means for Construction

The slight uptick in spending suggests steady but cautious activity, with residential construction showing resilience despite modest declines in new home sales and starts reported in recent months. Nonresidential construction remains mixed, with infrastructure, health care, and data center projects providing some support amid softness in commercial and lodging segments. Contractors face ongoing cost pressures and competitive bidding environments, while financing conditions remain stable but selective.

Demand conditions

The Federal Reserve Beige Book (June 3) reports steady demand for industrial and infrastructure projects, including defense and health care facilities. However, new residential construction edged down slightly, and home sales declined modestly, reflecting buyer caution amid higher mortgage rates and economic uncertainty. Inventory of homes for sale has increased modestly but remains below ideal levels, sustaining some upward pressure on prices.

Cost pressures

Contacts in the housing construction sector highlight sharp increases in building materials and delivery costs, driven by higher fuel and petrochemical prices. These cost increases are described as rapid and impactful, akin to tariff-like price shocks, which have dampened growth expectations for new home building across many regions.

Labor market and wage conditions

While the latest data does not provide direct new signals on labor availability, the competitive bidding environment and steady construction activity in select sectors suggest ongoing tightness in skilled labor markets, which may continue to pressure wage costs.

Credit, interest rates, and cash flow conditions

Credit conditions remain generally stable but cautious. The Beige Book notes some downward pressure on lending rates due to competition among lenders, though loan delinquencies have increased slightly. Mortgage refinancing activity has declined in some regions, and construction lending is mixed across sectors and geographies. Contractors and developers should monitor financing availability and terms closely.

Risks to watch over the next 30 to 90 days

Key risks include continued volatility in building materials prices and delivery costs, which could squeeze contractor margins and delay projects. Economic uncertainty and higher mortgage rates may further dampen residential demand. Credit conditions, while stable, could tighten if loan delinquencies rise or if lenders become more selective. Monitoring these factors will be critical for managing project pipelines and cash flow.

Practical business takeaways

• Plan for ongoing cost volatility in materials and logistics; consider locking in prices or sourcing alternatives where feasible.
• Maintain close communication with lenders to understand evolving credit conditions and secure financing on favorable terms.
• Monitor local housing market indicators, including permits and sales, to anticipate shifts in residential demand.
• Evaluate bidding strategies carefully in competitive markets, balancing margin protection with contract acquisition.
• Stay alert to public construction spending trends, especially in education and infrastructure, which may offer stable opportunities.

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References

1. Construction Spending (U.S. Census Bureau | 1 July, 2026)

2. Beige Book (Federal Reserve | 3 June, 2026)

3. New Residential Construction (U.S. Census Bureau | 16 June, 2026)