Data Centers Mask a Broader Nonresidential Construction Slowdown
Nonresidential construction spending ticked up 0.1% in July, but that headline number hides a much rougher picture for most of the industry, Construction Executive reports based on an Associated Builders and Contractors analysis of new U.S. Census Bureau data. Strip out data centers, and spending in the sector actually fell for the second consecutive month, dropping to its lowest level since September 2023.
Background
The Census Bureau’s July figures put seasonally adjusted annualized nonresidential construction spending at $1.286 trillion. Private nonresidential spending rose 0.4% for the month, while public nonresidential spending slipped 0.2%. But the aggregate 0.1% gain obscures a lopsided reality: 8 of the 16 nonresidential subcategories tracked by the Census Bureau were down on a monthly basis.
ABC Chief Economist Anirban Basu was blunt about the source of the growth. “The increase in nonresidential construction spending that occurred in July was entirely due to data centers,” Basu said, according to Construction Executive. “Excluding that booming category, nonresidential spending fell for the second straight month and is down to the lowest level since September 2023.”
Basu also pointed to a second category riding the same wave: power. “Nonresidential activity is even more concentrated given that the power category, which has been boosted by the electricity needs of data centers, has also grown substantially over the past year,” he said. Even ABC’s own Construction Confidence Index shows contractors remain upbeat about sales over the next six months, but Basu noted that optimism is “increasingly dependent on a single sector.”
Analysis
This is a concentration story, not a growth story. When two related categories, data centers and the power infrastructure that feeds them, are propping up an entire national spending figure while the majority of subcategories contract, the “growth” headline number stops being a useful signal for most contractors and subs. If you’re not pulling permits tied to hyperscale campuses or the substations, transmission lines, and generation projects that support them, the July data suggests your slice of the market is likely shrinking, not expanding.
That’s a meaningful shift in how field services companies should read economic indicators for the rest of 2026. A firm bidding on warehouses, offices, retail buildouts, schools, or general public works can no longer assume that a positive national nonresidential spending print means more work is coming their way. The eight declining subcategories are where the real economic weather is happening, and ABC’s data indicates that weather is worse than the topline number lets on, down to levels not seen since before the current data center buildout accelerated.
There’s also a structural risk buried in this concentration. Data center construction is capital-intensive, schedule-driven, and tied to a relatively small number of hyperscale developers and power utilities. If that spending pace cools, even modestly, there’s no broad base of other subcategories to absorb the shock, because those other categories are already softening. Subs who’ve pivoted hard into data center and power work should recognize they’re now more exposed to a sector-specific slowdown than a diversified nonresidential slump would otherwise create. Meanwhile, subs who haven’t captured data center or power work have little cushion from a “healthy” nonresidential sector, because outside those two categories, health is questionable.
What It Means for Subcontractors
- Electrical, E&I, and mechanical subs with active data center or utility-scale power contracts are working in the only part of the market showing real momentum right now. If your backlog leans this direction, prioritize retention of skilled crews since demand here is outrunning the rest of the sector.
- Civil, general trades, and finish subs tied to office, retail, education, or public nonresidential projects should treat the 0.1% national growth figure as misleading. ABC’s breakdown shows 8 of 16 subcategories declined in July, so check your specific project type against Census Bureau nonresidential subcategory data before assuming market conditions are stable.
- Public-sector focused subs face a tougher signal: public nonresidential spending fell 0.2% in July while private spending rose 0.4%. Firms bidding largely on public contracts should expect softer award volume near-term and diversify pipeline toward private work where possible.
- Firms without data center or power exposure should reassess reliance on ABC’s Construction Confidence Index optimism. Basu’s comments make clear that contractor confidence for the next six months is now tied heavily to a single sector, meaning a slowdown in hyperscale construction could flip broader sentiment quickly.
- Track next month’s Census Bureau nonresidential release (expected early October for August data) to see whether the eight declining subcategories stabilize or continue falling toward the September 2023 lows Basu flagged for the non-data-center segment.
