Q1 Construction Part Two: Large contractors, megaprojects show stronger activity

The US Census Bureau’s value of construction Put In Place data was roughly flat during the first quarter.

That said, construction spending figures are reported in nominal dollars rather than inflation-adjusted terms. During the same period, the US Bureau of Labor Statistics reported the construction materials producer price index readings and construction labor compensation both averaged roughly 6.5% above Q1’25 levels during Q1’26.

Because labor and material costs account for a significant share of construction spending value, portions of the nominal increase in construction spending likely reflected higher project costs rather than purely higher physical activity.

If the spending figures were deflated by that 6.5% as a rough estimate of cost inputs, the value of U.S. non-residential construction Put In Place edged slightly lower year over year.

Like Dodge’s construction starts data, the power segment remained one of the strongest contributors to construction spending growth in non-inflation-adjusted terms, second only to manufacturing in overall nominal value. Power construction spending averaged a year-over-year increase of slightly more than 7% during Q1’26. Manufacturing construction spending, meanwhile, declined by double-digit percentages January through March.

Total private construction spending declined by roughly 1% year over year during the first quarter, while public construction spending increased slightly more than 3%.

However, public construction represented less than one quarter of total US construction spending, while private construction accounted for the remaining majority. As a result, public-sector growth only partially offset weaker private-sector activity.

Interestingly, private-sector power spending increased by slightly more than 8% year over year, while public power spending increased by less than two-tenths of a percent.

Despite the smaller nominal value of public power activity compared with private-sector activity, both the outright size of private power spending and the magnitude of its increase helped support total construction spending figures. That dynamic carried additional weight considering private construction accounts for roughly three-quarters of total spending value in the US.

Private office builds also offset portions of the decline in manufacturing construction spending, consistent with Dodge starts data.

However, the broader spending data still appeared less expansive than the backlog and planning indicators. Much of the relative strength remained concentrated in power, office and large-scale infrastructure-related categories rather than across private construction more broadly.

Given the recent concentration of data center announcements, the sharp increase in Dodge’s office and data center starts category may appear heavily weighted toward data centers. However, Census construction spending data showed office construction spending itself also increased materially year over year. Office construction spending represented roughly 40% of the combined Census office and data center category during the quarter.

Inflation-adjusted figures would likely reduce the magnitude of nominal increases across many construction categories.

Putting it together

Leading indicators, or metrics intended to predict the future, generally strengthened more than current spending indicators.

The Dodge Momentum Index, Architectural Billings Index and Construction Backlog Indicator all improved through late Q1 and into April. However, much of that momentum remained concentrated in large-scale industrial, infrastructure and data center-related activity.

The Construction Backlog Indicator increasingly reflected that concentration entering April. The CBI started to move modestly higher than prior-year levels after trailing 2025 during January and February. However, the strongest gains came from heavy industrial, infrastructure and very large contractors. The commercial/institutional backlog still remained slightly below April 2025 levels.

Contractors above $100 million in annual revenue reported backlogs of 14.2 months in April compared with 12.0 months one year earlier, while smaller contractor categories stayed below 2025 readings. The Associated Builders and Contractors also stated contractors involved in data center work carried materially longer backlogs than firms without data center exposure, which was echoed by the Dodge Momentum Index figures.

Commercial planning activity that fed into the DMI was largely influenced by data center projects throughout the first four months of 2026. Commercial DMI readings posted large year-over-year increases on a headline basis, but logged declines or much smaller gains once data centers were excluded from the dataset.

Construction starts data showed a similar pattern as non-residential and nonbuilding starts posted stronger year-over-year growth than residential starts. However, large power, utility and other megaprojects materially influenced monthly swings in activity. Since Dodge reports starts in nominal dollar values, a relatively small number of large projects had a disproportionate effect on headline readings.

ABI readings approached the expansion threshold by March, and all industry-specific ABI categories moved above 50 by quarter-end. At the same time, newly signed design contracts declined for the 25th consecutive month in March. That dynamic would imply that architectural design firms worked through existing project pipelines faster than new projects replaced them.

Current construction spending data appeared softer than the leading indicators, as total construction spending was roughly flat year over year during Q1’26. Private construction spending, the larger share of US construction spending, declined during the quarter, while public construction increased modestly.

Again, the spending data also pointed toward concentration in selected categories rather than broad-based expansion.

Power construction remained one of the strongest contributors to spending growth, while manufacturing construction spending declined sharply year over year. Office construction spending also increased, consistent with stronger office and data center-related starts activity.

A significant limitation across the datasets is several indicators are reported in nominal dollar terms rather than inflation-adjusted values. Rising labor, material and energy costs likely inflated portions of the year-over-year increase in construction spending, starts and project planning values.

Overall, the indexes illustrated construction conditions entering Q2’26 were stronger among very large contractors and megaprojects, particularly related to data centers and power/utility projects, than across the broader construction market.

Data center, infrastructure, utility and industrial activity are increasingly separated from weaker conditions in portions of private commercial construction and among smaller contractors.