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Dive brief:
- Construction activity in the Twin Cities area declined this spring, with 54 percent of companies surveyed reporting lower activity than a year ago, compared with 23 percent reporting increases, according to the Federal Reserve Bank of Minneapolis.
- Economic uncertainty remains a key concern for contractors. Respondents to the bank’s survey described a “stop and go” environment in which projects are being delayed, halted or reconsidered, Erick Garcia Luna, the Minneapolis Fed’s regional director of outreach, said during a June 5 webinar.
- However, the data center construction boom offered a bright spot. “Industrial construction seems to be holding up in the district and the country,” Garcia Luna said. “Overall, investment in data centers and adjacent infrastructure keeps activity strong in this part of the industry.”
Diving knowledge:
The survey found that residential and commercial construction saw the sharpest declines, while industrial and infrastructure work continued to provide pockets of strength in the region.
According to census construction data, “activity has flattened since mid-2024 and declined slightly since late 2024,” Garcia Luna said.
The survey collected responses from 204 construction companies in the Fed’s Ninth District, which includes Minnesota, Montana, North Dakota, South Dakota, northwestern Wisconsin and Michigan’s Upper Peninsula. Most respondents reported a decline in activity compared to the previous year, reflecting weaker demand and a more cautious project environment.
“Construction companies continued to bear the effects of uncertainty and an evolving economic environment,” Garcia Luna said. “Residential and commercial construction pushed overall activity lower.”
Respondents pointed to several factors behind the slowdown, with competition for a small number of projects emerging as the industry’s top concern. Garcia Luna said some property owners are delaying investment decisions, leaving contractors to compete for fewer opportunities.
Find enough workers It also remains a persistent challenge across the district, although overall activity is easing, Garcia Luna added.
“Labor availability continues to be the story of the region,” he said. “Companies are just struggling to secure the labor they need to remain competitive.”
The survey also found that smaller and medium-sized businesses are feeling the most pressure. While larger firms reported some growth in activity, respondents at smaller firms were more likely to report declining workloads as competition intensified and the project pipeline narrowed.
Respondents also cited state and local regulations, the increase in the costs of materials and tariffs uncertainty as factors affecting project planning and investment decisions. According to Garcia Luna, these pressures have contributed to reducing backlogs and fewer requests for proposals, especially in the residential and commercial sectors.
Survey respondents also reported continued pressure from material and transportation costs, with many companies unable to fully pass these costs on to customers.
Despite weaker conditions, some areas of the market remain active. North Dakota stood out as an exception within the district, benefiting from infrastructure investments and data center development.
Looking ahead, contractors expressed cautious optimism that conditions could stabilize over the next six months, although respondents continue to expect pressures on the project backlog, prices and margins.
