Some of the market conditions that have worried contractors in recent years appear to be resolving, but new problems could emerge in a changing economic climate, construction and economics experts said during the biannual Economic Outlook webcast from construction software provider ConstructConnect on November 14.
After the inflation rate soared following the onset of COVID-19, inflation concerns have largely subsided, said Michael Guckes, chief economist at ConstructConnect. He noted that the US inflation rate fell to 1.6% in September, according to the Bureau of Labor Statistics.
Construction input prices have mostly calmed, with the producer price index for nonresidential inputs falling 1% between September 2023 and September 2024, said Ken Simonson, chief economist at Associated General Contractors of America, although the prices of some materials such as copper and brass mill. forms remain volatile. Delivery times for most items, except for certain electrical equipment, have been shortened. And the easing of federal regulations expected under the incoming Trump administration could help some projects get started sooner, he added.
Even architects, who have faced soft demand for the past two years, are eyeing a potential turnaround in 2025, said Kermit Baker, chief economist at the American Institute of Architects. A recent survey by the group found that more than two-thirds of its member companies were somewhat confident or very confident that they will see business conditions improve in the next 12-18 months.
“Call me optimistic, I think we’re starting to turn the corner,” Baker said. “I think we’re near the bottom and we should see things start again.”
Rates and Prices
At the same time, the tariffs that President-elect Donald Trump has said he will institute have the potential to cause “a big spike in prices” and could likely trigger a trade war, Simonson said.
“We would see a lot of projects canceled or at least scaled back,” he said.
Some types of projects, such as renewable energy developments and electric vehicle-related plants, will also find less support under the Trump administration, especially if officials move to withdraw any funding from the Infrastructure Jobs and Investment Act , the Inflation Reduction Act or Chips and Science Act, which has established billions of dollars for the construction of various types of projects aligned with the goals of the Biden administration.
The availability of skilled labor also remains an issue for contractors, Simonson said, pointing to recent AGC survey results. The roles of surveyors, estimators and pipe fitters/welders remain some of the most difficult to fill. The most common reason contractors have trouble filling available positions is that the available candidates are not qualified. And half of contractors said new hires didn’t show up or quit within days or weeks of starting. The new administration’s immigration policy will also be extremely important, but Trump’s comments on the issue “have not been encouraging” for contractors, Simonson said.
“Construction has always relied more than other sectors on foreign-born workers,” he said. “And if the border really gets closed more, and certainly if deportations are part of the mix, that’s going to affect construction even more than other sectors.”
