Expect A Negative Revision To 2025 Q4 GDP. Two Reasons

A recent construction report revision suggests a negative revision to GDP.

Construction Spending Month-Over-Month

December 2025 Construction Spending

• Total: +0.3 percent

• Nonresidential: -0.5 percent

• Residential: +1.5 percent

• Public: -0.5 percent

• Private: +0.5 percent

• Commercial: -0.4 percent

The jump in residential is interesting. But the net was an expected 0.3 percent rise.

Construction Spending Revision

Chart courtesy of Bloomberg Econoday.

In isolation, I would expect that -0.6 revision to construction spending to take about 0.1 percentage points off overall GDP.

However, things are not in isolation.

There might be more revisions, in either direction, to every GDP component.

But with the economy generally weakening, other revisions rate to be negative as well. That is reason number two.

Weakening Construction Spending

Construction spending generally peaked in May of 2024.

Construction Spending Commercial and Manufacturing

Construction Spending Commercial and Manufacturing

There is no boom in manufacturing construction, and there doesn’t rate to be. Tariffs are a failure.

Since June 2024, manufacturing construction is down from 240.09 billion to 202.42 billion. That’s a decline of 15.7 percent.

Construction Spending Year-Over-Year Percent Change

Construction Spending year-over-year percent change

Year-over-year construction went negative in the fourth quarter of 2024 and generally stayed there.

Bear in mind those are nominal numbers. It’s real (inflation-adjusted) numbers that add or subtract from GDP.

Year-over-year real numbers have been consistently negative since October of 2024.

Looking Ahead Factors

• The labor market is weakening dramatically

• With the war in Iran, gas prices could soar and stay there if the war is prolonged.

• Expect inflation pressures due to health care insurance.

Other than AI spending there is little to cheer about. And AI rates to take jobs. Things look stagflationary. But for now, the bond market disagrees.

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