United States: slowing down | Turner & Townsend

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Our Q3 2024 U.S. Market Intelligence Report provides market and regional analysis across the country, along with economic insights from our team of experts.

Economic and construction market overview

The U.S. economy is weakening, despite resilient preliminary Gross Domestic Product growth figures recorded in Q2 2024. At this stage, “weakening” does not point to an expected recession or downturn, but rather a slower pace of economic growth and more slack in the labor market.

The U.S. construction industry is not immune to softening, and it may even lead the curve, with a range of indicators suggesting that 2024 will see modest growth overall and 2025 could slow further.

The same is true for industry pricing. If the economy were to contract, that would typically be a leading indicator for bid price corrections. In the absence of contraction, construction costs are still increasing—just at a slower pace than before.

Overall, the picture is of a construction industry that’s slowing, but still growing, within a broader economy that appears positioned for a soft landing.

Optimism remains, despite slow down

The U.S. construction industry is slowing, with high interest rates continuing to be a barrier to growth. Many expect that September 2024 could bring the first interest rate cut in four years, offering some optimism for improved market conditions.

That said, a decrease is unlikely to meaningfully boost construction activity in the near term or immediately improve credit availability and cash flows. While stock markets can move quickly, it takes time for investors to shift strategies and for contractor balance sheets to strengthen. The positive impact of interest rate reductions on construction activity may lag by at least a year.

Market conditions shaping escalation forecasts

Construction escalation has eased slightly, yet bid price growth continues. In other words, escalation is not declining and bid prices (on average) are not lower than they used to be—they’re still rising.

Factors informing our escalation forecasts include:

Current activity: the U.S. economy is cooling, and the construction industry is softening. Growth continues, but varies by sector and location.
Leading indicators: data trends are moving downward and confidence remains constrained, although construction permits have improved.
Materials cost and availability: global commodity and freight costs remain elevated, but domestic costs and lead times have stabilized amid softer demand.
Workforce: skills shortages persist and wage gains remain elevated. The labor market is not as tight as it was, which should gradually reduce earnings growth over time.
Machinery and equipment: little change overall, although small reductions are easing some price pressures. Key items remain scarce and costly.