U.S. Construction Spending Falls in January as Manufacturing PMI Signals Modest Growth
The U.S. construction sector experienced an unexpected decline in January 2025, with spending falling 0.2% from December, according to the Commerce Department.
This drop brought the annualized spending rate to $2.193 trillion (R$13.16 trillion), down from December’s revised $2.196 trillion (R$13.18 trillion). The decline surprised analysts, who had expected no change, despite a 3.3% year-over-year increase in construction expenditures.
Private construction spending fell by 0.2%, driven by a 0.4% decline in residential investment, which reached an annualized $932.7 billion (R$5.60 trillion). Multi-family housing projects dropped 0.7%, reflecting weaker demand, while single-family home construction rose by 0.6%.
Elevated mortgage rates remain a major headwind for residential construction, compounded by an oversupply of unsold homes and potential new tariffs on imported lumber and other materials.
Public construction spending provided some stability, rising 0.1% to an annualized $506.6 billion (R$3.04 trillion). Federal government projects surged by 3.2%, offsetting a 0.1% decline in state and local government expenditures.
Highway construction rose by 0.6%, reaching $145 billion (R$870 billion), while educational facility investments fell by 0.4%. Non-residential private construction remained flat at $753.3 billion (R$4.52 trillion), signaling stagnation in sectors like office buildings and factories.
U.S. Manufacturing Sees Modest Growth
Meanwhile, the U.S. manufacturing sector showed signs of modest growth in February, as the S&P Global Manufacturing PMI rose to 52.7 from January’s 51.2, marking its highest level since mid-2024. The ISM Manufacturing PMI registered slightly lower at 50.3, down from January’s 50.9 but still indicating expansion after months of contraction.
Factory output grew at its fastest pace in nearly a year, supported by easing supply chain pressures and stabilizing input inventories. However, new orders slowed sharply, with the ISM New Orders Index falling to 48.6 from January’s 55.1, signaling weaker demand ahead.
Higher input costs remain a concern for both sectors, as rising commodity prices and looming tariffs on materials like lumber and steel threaten profitability and project feasibility.
The contrasting trends highlight the mixed economic signals in early 2025: while manufacturing shows gradual recovery, construction faces persistent challenges from high borrowing costs and trade uncertainties that could weigh on broader economic growth in the months ahead.
This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error · Editorial responsibility: Matthias Camenzind, Editor-in-Chief