US Machinery: Digging Into a Better Construction Outlook

Research evidence excerpt

US Machinery: Digging Into a Better Construction Outlook

US Machinery

08 July 2026 Citi Research

Updating our Construction Spending Outlook

We have updated our proprietary construction starts-to-spending model ahead of

2Q26 earnings, based on May’26 starts and CPIP data. While we anticipate total

nonresidential construction spending (buildings + non-buildings) to be flattish in

2026, we see building blocks for an acceleration in spending in 2027 and sustained

growth in 2028. This is supported by combined non-res buildings + non-buildings

starts that are up ~20% over the trailing-twelve-months (as of May’26), and up by

a similar amount YTD.

We don’t foresee residential construction spending turning positive until 2028 as

starts are down (~5%) over the trailing-twelve-months, and down (~4%) YTD, while

interest rates remain stubbornly high. Our housing team, led by Anthony Pettinari,

does not envision unit starts turning positive until 2027 (see here). Thankfully,

residential construction is a much less important market for our companies (both

OEMs and rental companies) compared to non-residential.

Figure 1. Citi’s Forecast for Non-Res Construction Spending Figure 2. Citi’s Forecast for Residential Construction

Spending

Non-Res Buildings Non-Buildings Residential

$1,600 +7% $1,000 (1%) (1.5%)+4.5% +9.5%

$1,400 (0.5%)

$800

$1,200

$1,000 $600

$bn $800 $bn

$600 $400

$400

$200

$0 $0

© 2026 Citigroup Inc. No redistribution without Citigroup’s written permission. © 2026 Citigroup Inc. No redistribution without Citigroup’s written permission.

Source: Citi Research, US Census Bureau Source: Citi Research, US Census Bureau

Breaking down our non-residential forecast between non-res buildings and non-

buildings (infrastructure), we anticipate non-res buildings spending to fall by a