No recession is expected in 2026 or 2027, but inflation, interest rates that now Iran The conflict will continue to challenge the economy, Anirban Basu, chief economist at Associated Builders and Contractors, said in a third-quarter economic update on Oct. 7.
On a year-over-year basis, total nonresidential construction spending rose 0.5% in August, according to data from the US Census Bureau. Data center work continues to spur the sector, as spending on office construction, which includes data centers, rose 24.6%. Spending in the electricity and highways and streets sectors also increased, by 8.5% and 4.6%, respectively, while business spending fell by 5.4%.
While data center work downsizing has picked up considerably in recent months, Basu doesn’t expect the work to slow down. “This is a country with more than 3,000 counties. Someone will say yes to these projects.”
Tariffs remain a concern as overall construction materials prices have increased 55.6% between February 2020, the last month before the COVID-19 pandemic, and August 2026. Steel products have seen the highest increase, up 103.4%, with non-ferrous wire and cable up 97.1%. Basu expects oil prices to “decline dramatically” once the conflict in Iran ends, but cautioned that the date is unknown. “Venezuelan oil production is coming online, so the world is awash in oil. But this conflict in the Middle East has to end for that dynamic to play out.”
Overall, despite a reported 2.2% GDP for the second quarter of 2026, “the base of economic growth has narrowed dramatically in the last three years or so,” Basu said. “I’m not idolizing this economy. Inflation was higher [and] stock prices were lower. But we were adding a lot of jobs.”
The driver of economic growth three years ago was wage growth, especially for entry-level jobs, he said. “Now what is the foundation of US economic growth? Harvesting intelligence, building data centers, corporate profits [and] stock market performance”.
Looking for quick answers on construction and engineering topics?
Try Ask ENR, our new intelligent AI search tool.
Ask ENR →
