Two numbers in FMI’s third-quarter outlook point in opposite directions, and both are correct.
Contractor sentiment is the best it’s been in a year. FMI’s Nonresidential Construction Index climbed to 55.1 from 53.4 in Q2, with expectations for respondents’ own businesses at 70.7 and backlog expectations at 69.8, up from 64.3. Meanwhile the spending forecast is negative: total U.S. construction spending of $2.214 trillion in 2026, down just over 1% from a 2025 that was itself flat.
The mix explains the contradiction
Manufacturing construction is projected to fall 17.4% to $178 billion. That’s roughly $37 billion coming out of the market as the semiconductor fabs and battery plants that defined 2022 through 2025 move past their heavy-spending phase into fit-out and commissioning. FMI names manufacturing as the single driver of the overall decline.
Data centers add most of it back. That segment is projected to grow 21.4% to $60 billion, and now accounts for more than a fifth of all nonresidential building starts. It’s what keeps the broader office category positive.
So the aggregate looks flat to down while individual firms in the right vertical feel excellent. Both readings are honest. They’re just measuring different companies.
Power is supply-gated, not demand-gated
The most actionable line in the report is the power forecast: growth of only 2% in 2026, held back by turbine and transformer lead times, then more than 8% in 2027, which FMI calls the strongest five-year trajectory of any segment it tracks.
That’s a specific claim about what’s capping the market, and it isn’t demand. If you’re an electrical or heavy-civil contractor deciding where to put headcount, FMI is telling you the wave is about a year out and gated by equipment delivery. Hiring ahead of it costs money. Hiring into it costs more.
Read the cost components carefully
FMI’s cost readings are on an inverted scale, where low means rising costs. Cost of materials came in at 16.4 and cost of labor at 19.8. Both are far below 50, which is close to unanimity that costs go higher, coming from the same contractors reporting improving backlog. Productivity slipped below neutral to 49.1.
That combination is the squeeze in one line: more work expected, at prices the people bidding it already believe will rise, with productivity flat.
For context on where the data center growth is going, see our listing for the Boeing St. Louis production expansion, one of the manufacturing programs still in its heavy-spending phase.