Hard Hat Economics: Finding construction's bright side

Data centers, obviously

You might have heard that we’re building a lot of data centers (if you haven’t, lift your rock and listen up!). Spending in the category is up 23% over the past year and a staggering 636% over the past five years. To put that increase into context, just three years ago, shopping malls were generating more construction activity than data centers.

The horror of the post-COVID era: Materials, labor and borrowing costs

First came an unprecedented increase in materials prices. Tangled supply chains, resurgent demand and suppressed production conspired to bolster construction input prices by a staggering 49% between April 2020 and April 2022.

As of May 2026, data centers are the largest nonresidential construction subcategory aside from electric power projects, and even that strength is downstream of data centers’ robust electricity needs.

This page is the only source for the subcategory construction spending data referenced in this article.

Source: U.S. Bureau of Labor Statistics

This is a source of momentum that isn’t going anywhere, at least over the next few years. The only potential near-term risk is the rising popularity of data center moratoria, and even those will merely shift activity to more amenable parts of the country.

Nothing leisurely about the amusement & recreation boom

Private sector investment in amusement and recreation projects has soared to an all-time high in 2026. This category’s name might evoke theme parks—a subsegment that is, indeed, scorching hot—but the surge in spending is driven by two less obvious sources: social centers, an ambiguously named subcategory that includes banquet halls, lodges, community centers and golf courses and sports facilities, which includes everything from a local soccer field to an NFL stadium.

The all-time high spending in the former is almost certainly due to new neighborhood centers, the kind that are particularly prevalent in age-restricted communities. The latter is, like so many other categories, driven by megaprojects like the Buffalo Bills’ new $2.2 billion stadium.

Contractors whistle past the graveyard

Okay, “graveyard” is a little dramatic, but contractors have remained consistently upbeat about the outlook even during a prolonged period of contraction in nonresidential spending. For instance, nearly 65% of contractors expect their sales to increase during the second half of 2026, while just 15% expect them to decline, according to ABC’s Construction Confidence Index. Profit margin and staffing level expectations, while not quite so upbeat, still indicate optimism on net.

CFOs working with or for construction organizations aren’t quite as upbeat as contractors, according to CFMA’s Confindex. This is hardly a surprise. Financial conditions are difficult at the moment, and as mentioned above, cost pressures are back in force. Despite that, the year-ahead outlook component of the index has improved from a year ago.

Looking ahead (without the rose colored glasses)

The conflict in Iran has (as of this writing) resumed, ending a brief but welcome late-June respite. That has exacerbated cost-related fears; oil prices are back above $80/barrel, and 10-year Treasury yields jumped more than 0.2 percentage points during the first three weeks of July. As a result, the industry will continue to grapple with rising input and borrowing costs over the near term, and momentum is unlikely to spread beyond the aforementioned sources.

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Disclaimer:

The views and opinions expressed in this article are those of Dr. Anirban Basu and do not necessarily reflect the official policy or position of Trimble Inc. This content is provided for informational purposes only and should not be interpreted as financial, investment or economic guidance from Trimble.