Construction Economic Report

Big Items

GDP: The government shutdown has delayed most Federal economic data. Q3 GDP was trending at 4% based on the latest available data, but much of the visibility needed is still delayed. Most estimates suggest that the government shutdown, because of its duration, may have brought Q3 GDP down to 1.5%. This is still reasonable given the circumstances. The good news is that consumer spending is still resilient, and nonresidential investment is still robust (mostly data center, power generation, some commercial, and general manufacturing increases). Residential activity was still dragging, and government spending was just 3% of growth (down from 18% a year ago).

Housing Permits/Starts: Housing affordability is still an issue. Despite starts and permit data being delayed by the shutdown, most estimates and private data show it still lagging. The brightest spots came from the NAHB builder sentiment data, which showed some improvement through October. Fed rate cuts and some subsequent stabilization in mortgage rates (because Treasury rates have stabilized near 4%) could begin to help pull some buyers off the sidelines.

Raw Material Prices/Availability: The next chapter of the tariff situation is about to take place. Section 232 tariffs are likely to remain in place, but the wave of tariff exemptions is about to start according to the White House. In 2018/2019, there were more than 55,000 tariff exclusions filed with the USTR; it awarded 14,000 exclusions (rewarded in three different waves theoretically). The challenge is that suppliers have to 1) work to file for exclusions, 2) wait for rulings which can take some time and 3) have to monitor conditions because the USTR does not usually contact suppliers to let them know that they are subject to taking an exclusion. For now, commodity prices will remain elevated.

Labor Situation/Labor Costs: The latest reading for the Employment Cost Index for construction was growing at a 4.2% annual rate (for those of you that set raises based on the ECI), that is up from 2.9% earlier in the year. Looking at just compensation for employees, the annual growth rate was 3.8%. Deportations and surging data center work have tightened labor conditions in some markets, while others are finding some mild hiring and wage relief. Areas that have significant slack residential activity are experiencing some softer conditions.

Manufacturing: The data from the S&P Global Index inched up in October, it was 52.9, up from 52.0 in the prior month. New orders domestically were sluggish, while export orders were noticeably weaker amid a mild global economic slowdown. Inventories were also noticeably weaker for manufacturers and their customers, but inventory sentiment (how purchasing managers feel about their inventory levels) suggests that they feel they are still sitting heavy. That will change, but it will keep reorder activity sporadic, until the end of the year.

Risks

2026 Oil Forecast Shock: Based on the latest data available, there is still a prediction for weak oil prices in 2026. Despite those forecasts inching up slightly in October, it will take an increase in global consumption or a significant cut in production to keep prices elevated in the $60-$70 range (which would be optimum for investment and spending).

Sentiment Weakness: – Consumer and business sentiment has plunged in the past 3 months; inflation and layoff concerns are at the top of the list. This could have a dampening effect on new projects, and the Fed has its eye on it (which will likely lead to lower rates).

November 2025 Report

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