The nonresidential construction market continued to face headwinds during the first five months of 2026 as spending fell 7 percent in nominal dollars compared to the same period a year earlier.

Reflecting this softer market performance, the AIA Consensus Construction Forecast Panel lowered its 2026 projection from a 1.0 percent increase in spending, forecast in January, to a 0.3 percent decline. Despite near-term challenges, panelists expressed greater confidence in a rebound next year, increasing their 2027 spending forecast from 2.2 percent to 3.0 percent.  Manufacturing construction experienced the most significant downward revision in the current forecast. Spending in the sector is now projected to decline 11.6 percent in 2026, following a 6.7 percent decrease in 2025, with an additional 0.6 percent decline expected in 2027.
 
Despite these reductions, manufacturing activity is anticipated to remain elevated by historical standards. The projected slowdown reflects a normalization of spending following the surge in investment spurred by the CHIPS and Science Act and the Inflation Reduction Act. Adding to that moderation is ongoing uncertainty surrounding tariffs and trade policy, which can significantly influence decisions to move forward with large-scale, multiyear capital projects.