Factory Construction Slump Weighs on Broader Nonresidential Sector Amid Trade Policy Uncertainty

This analysis is based on a report originally published by Construction Dive. For continuous industry updates, subscribe to the free Construction Dive newsletter.

The latest U.S. construction spending data paints a concerning picture for the private nonresidential sector, with a prolonged contraction in factory building acting as a significant anchor. According to an Associated Builders and Contractors analysis, spending on manufacturing construction—the largest nonresidential subcategory—fell 2.5% in December from the previous month. This decline marks the eleventh straight monthly drop, a trend reported by The Wall Street Journal that contrasts with earlier political pledges to revitalize domestic manufacturing.

"The weak spending figures align with a similarly soft backlog reading, where project volumes on contractors' books have recently hit a four-year low," noted Anirban Basu, ABC's chief economist. Industry associations have repeatedly cited uncertainty surrounding U.S. tariff policy as a key factor stifling long-term capital investment decisions for new facilities.

The weakness, however, extends beyond the factory floor. "While manufacturing is the most significant driver of nonresidential weakness, it's far from the only one," Basu emphasized. "Eight of the eleven private nonresidential subsegments contracted in December, and total private nonresidential spending is now down 1.8% year-over-year." An Associated General Contractors of America report identified the 11.4% annual plunge in manufacturing construction as the primary headwind for the broader category.

The third-largest subcategory, highway and street projects, also ended the year on a soft note, dipping 0.4% month-to-month in December. There were, however, pockets of resilience. Spending on power construction projects, the second-largest segment, led all categories with a 0.8% monthly increase. Office construction also saw a modest uptick of 0.4% for the month.

The persistent downturn suggests that without clearer trade policy directives, investment in industrial construction may remain subdued for several more quarters, continuing to exert pressure on the overall nonresidential construction landscape.

Industry Voices

Michael Chen, Project Manager at Heartland Builders: "These numbers confirm what we're seeing on the ground. Clients are pressing pause on major factory expansions. They need predictability to commit to projects that take years to complete. Until the tariff situation stabilizes, we're likely to see more hesitation than groundbreaking."

David Park, CFO at Apex Manufacturing Solutions: "It's a frustrating cycle. The intent to boost U.S. manufacturing is there, but the policy volatility is counterproductive. We deferred a $15M facility upgrade last quarter solely due to uncertainty about material costs and export markets. That's capital not spent, jobs not created."

Sarah Gibson, Economist at Midwest Policy Institute: "This is a self-inflicted wound. The data clearly shows that prolonged trade policy ambiguity is a direct tax on investment. The administration's mixed signals are creating a chilling effect that outweighs any short-term benefits from protectionist rhetoric. The construction sector is bearing the brunt of this indecision."

Rebecca Martinez, Principal at Urban Design Collaborative: "The bright spots in power and office construction are important. They indicate underlying demand in other areas of the economy. The focus shouldn't solely be on manufacturing's slump but on how to support these growing segments while navigating the broader trade challenges."