Nonresidential construction spending climbed 0.3% in February, reaching a seasonally adjusted annual rate of $1.26 trillion—the highest level ever recorded, according to an Associated Builders and Contractors (ABC) analysis of U.S. Census Bureau data released Tuesday.

Highway and Public Spending Lead the Surge

The increase was fueled largely by public projects, with spending rising in nine of the 16 nonresidential subcategories. Highway and street construction accounted for over 40% of the overall monthly gain, according to Anirban Basu, ABC chief economist. Private nonresidential spending edged up 0.4% for the month, while public nonresidential expenditures grew by 0.2%.

Despite the record-breaking total, Basu cautioned that growth remains uneven across different construction sectors, as contractors contend with high interest rates and uncertainties in trade policy.

Potential Slowdown in Hiring Signals Uncertainty

Although February’s spending hit a new high, trends in hiring suggest that contractors may be bracing for fewer opportunities ahead, said Ken Simonson, chief economist at the Associated General Contractors of America (AGC).

“Construction spending rebounded in February, following widespread severe weather that may have slowed projects in January,” Simonson said. “Investment remains positive compared to a year ago but the growth rate for all major categories has cooled, while contractors have trimmed hiring and slashed job openings.”

In February, hiring and job openings within the sector both declined, possibly signaling a slowdown in construction activity in the coming months, he added.

Infrastructure and Public Works Could Fuel Future Growth

While some concerns loom, Simonson pointed out that the surge in infrastructure-related projects may help sustain momentum.

“I expect substantial additional spending on highway and rail projects, and possibly broadband internet buildout in poorly connected areas,” Simonson said. “There has been rapid growth in water, wastewater, and airport construction, so it is hard to tell if this has peaked yet.”

Private Sector Spending Lags Behind Inflation

Despite the monthly high, Basu emphasized that the pace of growth tells a more complex story. Public nonresidential construction spending increased by 6.1% year-over-year, whereas private sector spending has struggled to keep pace with broader economic indicators.

“Unfortunately, private sector spending has not kept pace and is up just 2.5% since last February, a rate of increase slower than economywide inflation,” Basu said. “The mix of high interest rates, tight lending standards and unprecedented uncertainty regarding trade policy will continue to weigh on private sector construction in the coming months.”

As contractors navigate economic headwinds, public infrastructure projects remain a key driver of nonresidential construction spending, with federal funding initiatives playing a significant role in keeping the sector active.

Originally reported by Sebastian Obando in Construction Dive.