US construction indicators diverge as megaprojects lift starts: Part 1

Large projects continued to support planning activity and lifted construction starts, but spending and several measures of broader project flow weakened. The split became clearer through July and August as data center work continued to prop up aggregate readings.

The earlier Q1 data showed leading measures running ahead of construction activity. New data shows that strength becoming less uniform. Contractor backlog lost ground, while project planning remained high but lost much of its year-over-year lead. Meanwhile, construction starts remained high in dollar terms, supported by large nonresidential and nonbuilding projects, according to Dodge Construction Network.

Construction market signals narrow as backlog declines

Associated Builders and Contractors’ Construction Backlog Indicator (CBI) averaged 8.9 months in Q2’26, slightly up from 8.6 months in Q2’25. The quarter peaked at 9.1 months in May before slipping to 8.8 months in June. July then fell to 8.0 months, down from 8.8 months a year earlier.

By industry

The industry breakdown was far less uniform than the aggregate figure. Commercial and institutional backlog averaged 8.65 months from April through July, down 3.9% from the same 2025 period. Heavy industrial averaged 9.5 months, up 52%, and infrastructure CBI averaged 9.73 months, up 19%.

Heavy industrial remained an exception even after the July decline. Its backlog fell to 9.2 months from 9.7 months in June but remained far above July 2025’s 5.1 months. Infrastructure moved the other way in July, falling 8.8 months from 10.1 months and below the prior year’s 9.6 months.

By contractor size

Contractor size showed an equally sharp split. Firms above $100 million in annual revenue averaged 12.83 months from April through July, up 8.9% year over year. Contractors between $30 million and $50 million averaged 8.33 months, down 10.5%. Firm below $30 million were down 4.5% over the same period.

Data center exposure explains part of the gap. In July, 12% of ABC contractors had data center work under contract and reported 11.4 months of backlog. The remaining 88% reported only 7.5 months. ABC reported a similar difference in May and June, when data center contractors also carried several more months of work.

By region

The most recently available regional data showed a broader downturn in July.

Every region except the South posted a year-over-year decline in July, although each had recorded at least one year-over-year increase in May or June.

The Middle States, for example, averaged a longer backlog from April through July than during the same 2025 period. Its backlog was higher year over year in May and June before falling 0.9 months to 7.1 months in July, its largest year-over-year decline of the four-month period.

The South also averaged above its prior-year level from April through July and remained higher year over year in July. Meanwhile, July backlog fell 0.8 months year over year in the Northeast and 1.8 months in the West.

Planning remains high, but the year-over-year gap closes

Dodge Construction Network’s revised Dodge Momentum Index (DMI) shows planning activity remained high, although its year-over-year lead narrowed considerably after Q1.

The DMI averaged 278.8 from May through August, still 9.6% above the comparable 2025 period. Yet the year-over-year gap narrowed every month.

The headline DMI was 31.4% above May 2025, then 17.6% higher in June. The increase narrowed to 1.1% in July and August fell 4.3% below the prior-year reading.

Commercial planning followed the same path. The revised commercial index was up 40.6% year over year in May and 18.4% in June. It was only 4.3% higher in July before falling 4.1% in August.

Institutional planning moved differently on a month-to-month basis. The index increased from 163.6 in April to 219.8 in August, a 34% rise. Yet July and August were both about 4.7% below their respective 2025 readings because the prior-year base was much higher.

The aggregate DMI can be roughly reproduced with a 55/45 split between Commercial Building and Institutional Building, respectively. Commercial’s larger share helps explain August’s result. Institutional planning rose 4.9% from July, but commercial planning fell 3% and pulled the headline August figure down 0.4% from July.

Data centers widen the commercial divide

Data centers still account for much of the commercial separation, a trend seen in multiple US construction indicators. Dodge’s release-time calculations showed commercial planning excluding data centers up 6.56% year over year in May and 7.6% in June. The same calculation fell 16.2% below the prior year in July and 18.9% in August.

Some DMI aggregate and subcategory figures have since been revised, so the percentages may differ from those reported at the time of the initial releases.

The DMI measures the value of nonresidential projects entering planning and has led nonresidential building spending by one year to 18 months. The current index remains high in absolute terms, but its year-over-year lead has faded since early 2026. August’s 282 reading was almost unchanged from July, while commercial planning had already fallen from its May peak.

Megaprojects keep construction starts high

Dodge’s data on construction starts showed considerably stronger activity among projects reaching groundbreaking.

From April through July, the three main starts categories averaged a combined $1.58 trillion at a seasonally adjusted annual rate. The comparable 2025 average was about $1.18 trillion, a 34% increase. The pace also increased from earlier in 2026, with the April-July average about 33% above the $1.18 trillion average recorded during Q1.

Nonresidential building starts averaged 39% above the prior-year period. Nonbuilding construction averaged 59.5% higher. Residential starts, on the other hand, were only 3.9% higher.

The monthly composition was more uneven than the four-month averages suggest. Total starts were 29% higher year over year in April. Nonresidential supplied about 54% of the dollar increase, while nonbuilding supplied about 39%.

May was more concentrated. Total starts were 54% higher than May 2025, but nonbuilding accounted for about 70% of the increase. Dodge reported triple-digit monthly increases in utility and highway and bridge starts during the month.

June provides the clearest example. Total starts were 7% higher year over year even though nonresidential starts fell by $54 billion at an annual rate. Nonbuilding increased by $146 billion and more than accounted for the entire net gain.

Dodge reported that office and data center starts more than doubled from June in July. Manufacturing starts also rose sharply.

The largest nonresidential project was a $12.8-billion data center component of Project Jupiter, a STACK Infrastructure campus in New Mexico with Oracle as its tenant. A $12-billion Micron Technology semiconductor factory in New York and a $4-billion Amazon/STACK Infrastructure data center campus also broke ground.

Residential’s share of April-July total construction starts fell to about 24%, from roughly 31% in the comparable 2025 period. Meanwhile, nonbuilding increased its share to about one-third.

Large projects leave an uneven pipeline

The indicators show a construction pipeline increasingly divided by project type and scale. CBI shows contracted workloads became less uniform and weakened most recently, while DMI shows planning remained high even as its margin above year-earlier levels narrowed. Data centers accounted for much of the separation within commercial planning.

Further along the pipeline, projects reaching groundbreaking remained exceptionally large in dollar terms, with megaprojects lifting aggregate construction starts.

Part 2 will move further into what those conditions mean for construction activity. Architecture billings provide a view of design activity that could feed construction spending further ahead, while Census data measures work currently being put in place. Rising material and labor costs add another consideration when assessing what those nominal spending figures represent.