Data center construction outruns the nonresidential field again as material and labor costs reemerge

Nonresidential construction spending rose for a fifth consecutive month in August, and the Associated Builders and Contractors' account leaves little doubt about what carried the aggregate: data center construction continues to outrun the rest of the nonresidential categories. ABC chief economist Anirban Basu said investment in the artificial intelligence buildout has skyrocketed over the past four months. "Frankly, it's becoming difficult to contextualize the size and speed of this boom," Basu said.

The release puts no dollar figure on the data center category, so the acceleration shows up as direction and duration rather than a level. Breadth is measurable, if modest: spending rose on a monthly basis in 11 of the 16 nonresidential categories, and manufacturing construction turned positive for the first time since January, according to Basu. He narrowed the horizon from there. "Despite this broad improvement, momentum will likely remain confined to the data center and power categories in the months to come," Basu said, noting that materials and labor cost escalation have reemerged during the second half of 2026 and that a recent surge in Treasury yields will keep pushing borrowing costs higher.

The Associated General Contractors of America added a caution from the public side of the ledger: the short-term federal highway funding extension that took effect Thursday omits money for key programs, which will lead to a drop in federal infrastructure funding. Chief economist Ken Simonson called it encouraging that several segments stabilized or turned positive in August, but said every one of those categories remains at risk of stalling as workforce shortages grow, materials and interest costs rise, and congressional gridlock keeps undermining highway and transit programs.

Basu's pairing of data centers with power puts both halves of a project inside the same forecast. Our reporting has found contractors holding data center awards carrying 9.9 months of backlog against 8.3 months for those without; earlier, it found the count of planned data center projects had nearly tripled, with power as the gate on delivery. If momentum stays confined to compute and power construction, the pipeline that converts is the one with both a shell and an interconnection — and those are the two categories most exposed to the cost lines Basu flagged.

Nothing in the release points to a slowdown; it does show, though, that breadth is thinner than the aggregate implies: 11 of 16 categories grew in August, and the forward call rests on two of them, both buying materials, labor and credit on terms Basu describes as worsening. That concentration is what to watch when the next monthly figures land.