The basics:

• March construction spending fell 0.5% to $2.2 trillion
• Data centers largely drive private nonresidential growth
• Public sector spending dipped despite year-over-year gains
• Economists cite tariffs, high costs and policy concerns as key drags

The latest U.S. Census Bureau data indicates construction spending pulled back in March as economic uncertainty fosters trepidation.

The estimates came in at a seasonally adjusted annual rate of $2.2 trillion; 0.5% below February’s revised numbers. Year over year, spending is up 2.8% compared with the March 2024 estimate.

However, Associated General Contractors of America Chief Economist Ken Simonson said the figure represents the slowest year-over-year growth rate since 2019.

Significantly smaller growth margins trended across categories. While showing gains, the numbers were significantly below growth realized the year prior.

In its analysis of the latest report, AGC noted the drop in demand coincides with growing uncertainty regarding the impacts of tariffs, particularly concerning material costs and demand for new projects.

“Construction spending retreated in March, as media reports and corporate announcements suggest owners are hesitant to start new projects in light of uncertainty over tariffs, government funding, and other policy upheavals,” Simonson said. “Spending has slowed over the past year and as current projects wind down, there may be several months of declining construction activity.”

According to the data, construction spending totaled $485.7 billion for the first quarter of 2025; 2.9% above the same three-month period last year.

Market movement

For March, construction spending in the private sphere was 0.6% below February’s revised estimate. Private, nonresidential construction was down 0.8% versus the month prior.

Evaluating the latest figures, Associated Builders and Contractors Chief Economist Anirban Basu highlighted data center investments as “perhaps the only remaining source of industry momentum,” accounting for more than 70% of the uptick in year-over-year private nonresidential construction spending.

“Manufacturing construction, while still elevated, has wavered in recent months,” Basu continued. “Most commercial segments remain subdued under the weight of high borrowing costs and tight lending standards. Residential construction continues to slide.”

AGC identified manufacturing plants as the largest private segment. “Private power construction spending inched down 0.1%. Commercial construction—warehouse, retail, and farm projects, declined 1.0%,” according to the association’s analysis.

Public construction spending was $508.1 billion in March, or 0.2% below the the revised February estimate. While up 4.7% year over year, in 2024 the figure jumped more than 13% from the March 2023 total.

“Of the three largest public construction categories, highway and street construction fell 0.5% in March, while spending on educational and transportation facilities each declined 0.6%,” noted the AGC report.

AGC officials said that the Trump administration’s focus on expediting federal reviews and permitting should help accelerate public-sector construction activity.

“Finding ways to eliminate uncertainties and keep prices from escalating during trade disputes will also help boost private-sector demand,” noted Associated General Contractors of America CEO Jeffrey Shoaf.

Citing “unprecedented economic uncertainty,” ABC‘s Basu forecasted spending was unlikely to bounce back in the near term.

“While a majority of contractors surveyed in March were still optimistic about their future sales, according to ABC’s Construction Confidence Index, sentiment is likely to falter as the effects of tariffs begin to raise input prices and stall or cancel projects,” he said.

The April 2025 Monthly Construction Spending Report is scheduled for release June 2.