Growth Is Still There. Capital Has Moved.

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Real GDP grew 1.5 percent in the second quarter, down from 2.1 percent in the first, according to the advance estimate released by the Bureau of Economic Analysis. Investment continued to grow, driven by equipment and intellectual property products, but nonresidential structures investment declined for the tenth consecutive quarter. The headline number says the economy is still expanding. The composition of growth suggests a growing share of that investment is flowing somewhere other than new buildings.

What did the headline GDP number show?
Real GDP rose 1.5 percent in Q2, down from 2.1 percent in Q1. The deceleration reflected a downturn in government spending and slower growth in investment and exports, partly offset by an acceleration in consumer spending, according to BEA.

What happened inside investment?
The increase in investment primarily reflected increases in equipment and intellectual property products, partly offset by decreases in private inventory investment and nonresidential structures. BEA attributed the decrease in structures investment to manufacturing structures specifically, based on Census Bureau construction spending data for April and May and a BEA projection for June.

That decline is not a one-quarter event. Nonresidential structures investment, measured in chained 2017 dollars, has now declined for ten consecutive quarters, a run that dates back to Q1 2024. Equipment and intellectual property investment have generally remained positive over the same stretch, with both categories dipping alongside structures only once, in Q4 2024.


Why does the equipment/structures split matter?
Businesses continue to invest, but those dollars are increasingly being directed toward equipment, software, automation, and other technology-related investments rather than new facilities. A reader who only sees the 1.5 percent GDP figure, or even the nonresidential fixed investment total, would miss that the building-specific component inside it has been contracting for over two years.

Why does this line up with the ABC and ABI backlog data?
The ABC Construction Backlog Indicator and the AIA/Deltek Architecture Billings Index both softened in their most recent readings, capturing different stages of the project pipeline. The GDP structures data provides a third, independent signal from an entirely different source and methodology: capital is still flowing into the broader economy, but a smaller share is finding its way into new construction.

What does this mean for a preconstruction team?
The GDP figure remains positive, and equipment and technology investment continue to be important sources of economic growth. For firms working in pharma, healthcare, and life sciences construction, structures may be a more important indicator than the headline GDP number.

The key takeaway is that understanding where capital is flowing today may provide a better indication of future construction demand than the headline GDP growth rate itself.

Bottom Line: The economy is still growing, but the mix of investment is changing. Investment spending has not disappeared. It has shifted away from structures and toward equipment and intellectual property.

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