Construction Economic Report
Executive Summary – August 2026
Big Items
GDP: Q2 GDP came in at 1.5%, below the historical norm of nearly 2%. But this hid the real story. Most of the sectors that drive construction and investment did well. Import activity pulls against actual GDP, but it is important for many aspects of construction. Just to underscore how volatile the market is, the current GDPNow estimate shows growth of 5.8% at the start of Q3. That will cool and come down from those levels, but the point is that there are strong underlying growth trends in the economy – for now.
Housing Permits/Starts: There has been some better news as far as housing starts are concerned. The private owned rates were 19% above the revised May numbers and 3.5% above the rate from June of 2025. The single family rates were a little below the revised May number but only by 0.2% (3.2% lower Y/Y). The trends in housing have been stronger than expected given higher mortgage rates but there has been increased housing demand and the unemployment rate is still low.
Raw Material Prices/Availability: The supply chain issues have not faded and in many cases the situation has worsened. The fuel crisis has affected every part of the transportation sector with 100% hikes in the costs of container shipping. The price for diesel fuel has jumped to between $5.35 and $5.37 and that begins to drastically limit trucking availability as smaller operations can’t afford these fuel costs and these trucks are subsequently parked. The maritime sector has been hampered and that affects the ability of suppliers to meet demands. Commodity prices have been impacted by the never ending chaos of tariffs and trade wars.
Labor Situation/Labor Costs: The latest reading for the Employment Cost Index for construction is still gaining. The overall index is growing faster than inflation at 3.4%, and benefit costs are rising even faster at a 3.8% pace. The inflation concerns of the last few months have been centered on oil, but the impact of wage hikes can’t be dismissed. The construction sector has seen wage hikes that are mixed – low skilled jobs are seeing a decline in wages, but high skill jobs are seeing hikes of close to 4%.
Manufacturing: The Purchasing Managers’ Index put forward by S&P Global as well as the Institute for Supply Management have shown some stability in the last month but there is a caveat to be aware of. The S&P global reading for the US is 53.9, which was unchanged in July vs. June’s figures. The global PMI is now at 52.1, marginally down from 52.2 in June. These base PMIs are still much higher than was the case even a few months ago but the catch is that many manufacturers are producing ahead in an attempt to hold off the impact of new tariffs and the continued disruption in the oil markets. That surge will be ending soon.
Risks
Oil, Oil, Oil: Are we all getting really tired of this game? Every day seems to bring either another promise of an imminent breakthrough or the destruction of the just announced deal. What breaks this pattern? It will basically require a capitulation by either Iran or the US and there seems no appetite for such a climbdown by either nation. Long-term plans suggest the oil world is seeking to place more emphasis on Latin America and other suppliers of oil and gas but that will take time.
Waiting for the Inflation Shoe to Drop: The most pressing economic issue is now the path of inflation. This is what the Federal Reserve is watching and that became evident at their most recent meeting. There were three members of the Open Market Committee that were urging a rate hike rather than a reduction. It is significant that these three are all from the regional Fed banks as these 12 Fed members are considered the “eyes and ears” of the Fed. Lorie Logan from Dallas, Neel Kashkari from Minneapolis and Beth Hammack from Cleveland are all considered hawks and now think that inflation is enough of an imminent threat to warrant a rate hike.
August 2026 Report
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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.