US Construction Spending Rises, Outpaces Year-Ago Period

The increase in construction spending happened even though builders were concerned about rising costs.

An aerial view of apartments undergoing construction in downtown Austin, Texas, on March 19, 2024. Brandon Bell/Getty Images/TNS

Construction activity spending across the United States rose in February on both a monthly and annual basis, with residential and nonresidential spending registering an uptick.

“Construction spending during February 2025 was estimated at a seasonally adjusted annual rate of $2,195.8 billion,” the Census Bureau said in an April 1 statement. This was up 0.7 percent from January and 2.9 percent from a year back.

The bureau highlighted that construction spending in the first two months of 2025 has outpaced numbers from the same period in 2024.

Construction spending includes money spent on new projects such as infrastructure and housing. Since the construction sector is a crucial component of the economy, growth in the sector positively impacts gross domestic product (GDP).

New single-family private construction spending for February increased by 1 percent from a month ago, suggesting strengthening construction activity at the beginning of the year.

Previous data released by the bureau had shown that housing starts rose by more than 11.2 percent in February, month over month, with single-family housing starts jumping by 11.4 percent.

Gains in construction spending and housing starts occurred despite costs remaining elevated.

“Builders continue to face elevated building material costs that are exacerbated by tariff issues, as well as other supply-side challenges that include labor and lot shortages,” said Buddy Hughes, chairman of the National Association of Home Builders (NAHB).

On the plus side, “builders are starting to see relief on the regulatory front to bend the rising cost curve,” he said.

Anirban Basu, chief economist at Associated Builders and Contractors (ABC), said a recent survey by the group showed construction contractors remain optimistic about business conditions in the United States improving through the first half of the year.

“Nearly 60 percent of contractors intend to increase their staffing levels over the next six months, the highest share in over two years. These hiring expectations suggest that the recent slowdown in industrywide employment is largely confined to the residential segment,” Basu said.

“Yes, there are some broader signs of emerging economic weakness, but the results of this ABC member survey suggests that contractors will remain busy over the next few quarters.”

Lumber Prices

A further boost in construction spending may require lowering input prices of raw materials, with lumber being a key material.

The NAHB is calling for action to tackle high lumber prices, according to a March 31 statement.

“Lumber prices are currently 15.6 percent higher than they were one year ago,” the NAHB said.

“Amid swelling uncertainty about tariffs, the price of softwood lumber was the highest since June 2023.”

The NAHB attributed the volatility in softwood lumber prices in recent years to higher demand, bottlenecks in the supply chain, insufficient domestic output, and increasing tariffs.

To address high lumber prices, the NAHB is advocating for boosting domestic production through actions such as opening up federal forest lands for logging. It asked for the reduction of lumber exports to international markets such as China.

The association also recommended seeking out new markets for lumber imports.

“Identify new markets (besides Canada) and work with countries already exporting softwood lumber to the United States to increase their exports here,” it said.

The Trump administration is taking action on the issue.

On March 1, President Donald Trump signed a presidential action directing Commerce Secretary Howard Lutnick to investigate the possible harms that importing lumber, timber, and derivative products have on national security.

The directive said that the United States currently has the production capacity to meet 95 percent of the country’s softwood lumber consumption.

The presidential action made it a policy to ensure there are “reliable, secure, and resilient” supply chains established for timber and lumber.

“Our disastrous timber and lumber policies, a legacy of the previous administration, trigger wildfires, and degrade our fish and wildlife habitat,” said Peter Navarro, senior counselor on trade and manufacturing.

“They drive up construction and housing costs and impoverish America through large trade deficits that result from exporters like Canada, Germany, and Brazil dumping lumber into our markets at the expense of both our economic prosperity and national security. That stops today.”