Construction Economic Report
Executive Summary – March 2025
Big Items
Real GDP: Q1 GDP is showing some pressure through this “transition” period. There was a significant amount of gold imported into the US in Q1, which is skewing GDP data. Without the adjustment for gold imports, GDP is currently contracting at 1.8%. When adjusting that data, the economy was managing mild growth of 0.4%-0.8%. Consumer spending, residential and corporate investment was still ‘stable’, but were beginning to show some signs of stress.
Raw Material Prices/Availability: Amid tariff risk, construction material prices are heavily mixed. Some commodities are seeing price deflation as global demand softens and supply increases (such as nickel and nickel-based commodities). Hot-Rolled Steel prices have also not reacted to 25% tariffs, prices were still down 5.8% Y/Y despite rising by 4% YTD. But other areas are surging. Copper for instance, is up 26.3% YTD and 24.9% Y/Y, pushing prices for copper-based products higher. At the time of writing, tariffs were still being implemented, and exclusion grants were not clear, which could affect prices when the full tariff impact is understood (could push them higher or lower).
Labor Situation / Labor Costs: In general, the costs of labor in construction started to ease at the end of 2024. The Labor Cost Index grew at 2.8% through Q4, down for the 5th consecutive month. The broader wage measures for the macroeconomic environment were still growing between 3.8% and 4% through February, which is in-line with growth rates over the past two years. There are many questions about the role of deportations (although most estimates suggest that impact to actual workers may be less than expected), government layoffs (and resulting private sector layoffs), and aging demographics and the impact of retirements. There were still 7.7 million jobs open across the country with more than 236,000, which was down 42% from a year ago (but was 15% higher between December and January).
Manufacturing: The latest manufacturing data showed some weakness. The Flash PMI report through mid-March came in at 49.8, down from 52.7 last month and in slight contraction. There was a lot of speculation that companies had pre-ordered merchandise to try and get ahead of tariff risk and this helped spur February activity. New orders around the world were generally sluggish in March (based on preliminary reports) and some pullback in investment and spending was taking place elsewhere. But the US is likely to be in a different situation because Federal actions to push US manufacturing is ramping up. Reshoring activity will take time to materialize, and there isn’t recognition of this year in measures like the Architectural Billings Index, but that will come.
Risks
Tariffs: This has been the biggest concern among business owners and one that continues to develop. At the time of writing, reciprocal tariffs had not yet been announced and negotiations between the US and foreign trading partners were still ongoing. Tariffs will obviously work in two directions for the construction industry. Of course, it will spur nonresidential construction activity but could push inflation risk for project costs higher and could lead to some supply chain shortages of certain materials. Some purchasing managers are holding off on new orders for key raw materials and components waiting for tariff decisions, and some have received heavy orders from customers in the interim trying to get ahead of this risk. That is running some supplies low, which is likely a Q2/Q3 concern before the market stabilizes thereafter.
For most new construction projects, despite some new easing of permitting, projects will not likely be shovel ready until 2026 (especially for projects that are new facilities and not add-on expansions to existing facilities). Again, data could show a sharp and rapid change in activity, but for now foot traffic at A&E firms was still muted based on the latest data. After the April 2nd deadline for reciprocal tariffs (making tariff policy clearer for all), more firms may move on new reshoring activity.
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The CICPAC Quarterly Economic Report is published quarterly for the Construction Industry CPAs and Consultants. Its contents are solely for informational purposes and any use thereof or reliance thereon is at the sole and independent discretion and responsibility of the reader. While the information contained in this report is believed to be accurate as of the date of publication, CICPAC and the author disclaim all warranties, express or implied, as to its accuracy and completeness.