ENR’s construction confidence index rose four points between the third quarter and the fourth quarter, to a slightly upbeat 52. The economic index also rose four points to 48.
The confidence index measures executive sentiment about where the current market will be in the next three to six months and over a 12- to 18-month period, on a scale of 0 to 100. A rating above 50 shows a growing market. The measure is based on responses from US executives at major general contractors, subcontractors and design firms on ENR’s top lists to surveys sent between Oct. 27 and Dec. 8.
Construction executives report much more optimism about where the market will be in 3-6 months than they were last quarter. In Q3, 30.2% of respondents predicted a declining market in 3-6 months and 21.7% saw an improving market. In the fourth quarter, these figures have practically reversed. Now, 28.1% see the market improving in 3-6 months and 21.9% seeing a decline.
Subcontractors report significantly higher confidence than design firms or GC/CMs. Separately, its confidence score rose 12 points from the third quarter to a score of 59. GC/CM confidence fell five points to a score of 47, with design firms rising three points to a rating of 44. Looking at the market 3-6 months out, the difference is even more stark. Subcontractor confidence stands at 66 for this time period, with GC/CM and design firms at 45.
Results from the Construction Financial Management Association’s (CFMA) Confindex survey in Princeton, NJ also saw a slight uptick in the fourth quarter.
Each quarter, CFMA consults CFOs of general and civil contractors and subcontractors about markets and business conditions. The resulting Confindex is based on four separate financial and market components, each rated on a scale of 1 to 200. A rating of 100 indicates a stable market; higher ratings indicate market growth.
Source: ENR/BNP Media
Source: ENR/BNP Media
The global Confindex rose two points to a rating of 106 this quarter. Financial conditions rose 2.9% to a rating of 109 in Q4, with the outlook index for the year rising 4.4% to a rating of 118. Both the business conditions and current confidence indexes remained flat at 105 and 97 ratings, respectively. The current Confindex has remained below the benchmark rating of 100 since the second quarter. With one exception, it had been above 100 since the second quarter of 2021. The 21-point difference between this index and the outlook indices for the year ahead is the largest gap between them since the fourth quarter of 2020.
“I’m a little bit surprised by some of this optimism because of the trajectory of construction spending,” says Anirban Basu, managing director of Sage Policy Group and an adviser to the CFMA. He also points to the AIA’s Architectural Turnover Index, which remains below the benchmark reading of 50, suggesting that design work is being contracted out.
Basu sees lower expected project financing costs, driven by falling interest rates, as the main driver of the relative optimism among construction executives. The Federal Reserve voted to cut interest rates by a quarter point on December 10.
He believes businesses expecting more rate cuts next year may be disappointed. “Inflation is stubbornly above the Federal Reserve’s 2% target, and recent readings have suggested that inflation may be accelerating again,” he explains. Just over 18% of ENR survey respondents reported that their customers’ access to financing has been a little or a lot easier than six months ago, up from 4.6% in the third quarter.
Also fueling optimism for 2026 is the sense that rates haven’t been as impactful as economists predict, says Sage’s CEO. “We’re talking about 50% tariffs on steel, aluminum and copper. That’s not insignificant, but the global market for some of these commodities is so weak, in part because the Chinese economy is growing at about 4% now, that these tariffs have acted more as a floor than driving prices much higher.”
Basu continues to see data centers and energy as the only two markets with real momentum through 2026. Confidence in the energy market stood at 93 this quarter according to ENR’s survey, the highest rating ever for a market.
“Am I worried about an AI bubble? Yes. But am I worried about it bursting in 2026? Not so much from a construction perspective,” he says. He notes that Meta, AWS, Alphabet and Microsoft have committed to major data center programs by 2026. “The spending is so significant that Amazon has had to go to the debt market to finance some of that investment,” he adds.
The Sage economist believes homebuilding may pick up in 2026. “A lot of homebuilders think if we get below 6% on a 30-year fixed mortgage rate, things will start to take off. And we’re almost there.” Demolition is another segment that looks good in the coming years. “[We have] so many abandoned malls, so many abandoned Class B and Class C office buildings right now.”
One segment where Basu sees the impact of tariffs is in manufacturing-related construction. “50% of what we import is intermediate goods and so for manufacturers, costs have gone up and margins have gone down.” He cites the Institute for Supply Management’s manufacturing PMI, which has been below the 50 mark for nine consecutive months.
