Our Q1 2025 U.S. Market Intelligence Report provides market and regional analysis for the United States, as well as economic insights from our team of experts.
Economic and construction market overview
The U.S. economy currently points to moderate growth, with continued attention on global trade and keeping inflation in check. Consumer spending remains solid, though softer consumer confidence—and policy decisions around interest rates and tariff measures—could reshape the outlook in 2025 and beyond.
Within this broader macro environment, the construction industry is balancing both opportunities and challenges. Commercial and residential development has shown some recovery, though results vary by region. Public infrastructure work continues to support a healthy construction pipeline, particularly for transportation and energy upgrades.
Industry pricing has remained under inflationary pressure, driven in part by speculation about tariffs and their eventual impact. As a result, costs are expected to rise, and contingency and risk allowances are likely to increase.
Trade disputes have complicated market conditions, but industry sentiment remains constructive and pragmatic, with stakeholders closely tracking policy shifts, global trends, and cost movements.
U.S. policy measures could impact post-COVID-19 input cost recalibration
Materials
Construction material costs registered a modest 0.4% increase quarter-over-quarter in Q4 2024, following two consecutive quarterly declines. Lumber was an outlier, rising 4.4% quarter-over-quarter. This coincided with increased demand from homebuilders to support rebuilding and repair needs following several natural disasters across the U.S.
The overall materials cost outlook is likely to shift, as recent tariffs imposed by U.S. President Donald Trump threaten to push costs higher. In particular, tariffs on steel and aluminum will increase costs for both raw and finished products, leaving contractors to either absorb increases or pass them through to owners.
Labor
The labor market continues to cool, with construction wage growth easing as overall demand moderates. Average hourly and weekly wage growth declined from 4.4% in Q3 2024 to 3.9% in Q4 2024, reflecting softer conditions.
What do current market conditions mean for our escalation forecasts?
The overall rate of construction escalation has been impacted by several drivers. Key trends informing our escalation forecasts are:
- Current activity: the U.S. economy is growing steadily, and the construction industry reversed its shortfall in Q3 2024. Overall performance remains sluggish, despite pockets of strong demand.
- Materials cost and availability: material costs have stabilized, but recent tariffs on steel and aluminum could drive costs higher.
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Workforce: wage growth has moderated, but labor shortages persist—particularly in skilled trades—potentially exacerbated by changes in immigration policy.
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Machinery and equipment: high capital costs and elevated interest rates continue to affect affordability, though price pressures are easing.
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