Construction, manufacturing still struggling in the Summer

On Tuesday, we got our first look at US construction spending for July, and it continued the down trend that we have seen for much of 2025.

Construction spending during July 2025 was estimated at a seasonally adjusted annual rate of $2,139.1 billion, 0.1 percent (±0.8 percent)* below the revised June estimate of $2,140.5 billion. The July figure is 2.8 percent (±1.5 percent) below the July 2024 estimate of $2,200.7 billion. During the first seven months of this year, construction spending amounted to $1,232.7 billion, 2.2 percent (±1.0 percent) below the $1,259.9 billion for the same period in 2024.

Private Construction
Spending on private construction was at a seasonally adjusted annual rate of $1,623.3 billion, 0.2 percent (±0.5 percent)* below the revised June estimate of $1,626.3 billion. Residential construction was at a seasonally adjusted annual rate of $886.5 billion in July, 0.1 percent (±1.3 percent)* above the revised June estimate of $885.9 billion. Nonresidential construction was at a seasonally adjusted annual rate of $736.7 billion in July, 0.5 percent (±0.5 percent)* below the revised June estimate of $740.4 billion.

The positive in this report is that the declines for May and June weren’t as severe as initially reported, and that might give a minor boost to Q2 GDP in its later revisions (if we haven’t already seen it). But it still shows that things are still going the wrong direction in the construction sector. And that's especially true if you take away all of the new construction of data centers in the last couple of years.

Also on Tuesday, we got a report that showed US manufacturing continued to be in the doldrums.

U.S. manufacturing contracted for a sixth straight month in August as factories dealt with the fallout from the Trump administration's import tariffs, with some manufacturers describing the current business environment as "much worse than the Great Recession."

The Institute for Supply Management (ISM) survey on Tuesday also showed some manufacturers complaining that the sweeping import duties were making it difficult to manufacture goods in the United States. President Donald Trump has defended his protectionist trade policy, which has raised the nation's average tariff rate to the highest in a century, as necessary to revive a long-declining U.S. industrial base.

The ISM said its manufacturing PMI edged up to 48.7 last month from 48.0 in July. A PMI reading below 50 indicates contraction in manufacturing, which accounts for 10.2% of the economy. Economists polled by Reuters had forecast the PMI would rise to 49.0.

Not the right trajectory there, and the same report said prices continued to increase, and remained at inflationary levels that haven't been seen in 3 years.

The ISM® Prices Index registered 63.7 percent in August, decreasing 1.1 percentage points compared to the previous month’s reading of 64.8 percent, indicating raw materials prices increased for the 11th straight month (though at a slower rate compared to July). The Prices Index has increased 11.2 percentage points over the past nine months. In the last six months, the index reached its highest levels since June 2022, when it registered 78.5 percent. All of the six largest manufacturing industries — Machinery; Food, Beverage & Tobacco Products; Computer & Electronic Products; Petroleum & Coal Products; Transportation Equipment; and Chemical Products, in that order — reported price increases in August. “The Prices Index reading continues to be driven by increases in steel and aluminum prices that impact the entire value chain, as well as tariffs applied to many imported goods. Higher prices were reported by 33.5 percent of respondents in August, down from 35.4 percent in July. The share of respondents reporting higher prices trended up from November 2024 (12.2 percent) to April (49.2 percent), which was the highest level since June 2022 (65.2 percent),” says Spence. A Prices Index above 52.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Producer Price Index for Intermediate Materials.

An even bigger indicator of August's economy will be the jobs report that comes out on Friday (assuming the numbers are legitimate). But these manufacturing and construction reports show that things were still a struggle in these sectors, with tariff-affected higher prices still being felt by manufacturers, and a lack of building activity isn't going keep the jobs coming in construction sector either.