Our Q2 2025 U.S. market intelligence report provides market and regional analysis for the country, as well as economic insights from our team of experts.
Economic and construction market overview
The U.S. economy entered mid-2025 on firmer ground than the winter data suggested. Real GDP reversed a small contraction in Q1 with a healthy rebound in Q2, driven largely by a smaller trade deficit. Domestic demand grew more slowly, while disinflation continued. With inflation trending toward target, the Federal Reserve has kept its policy rate unchanged since December.
New agreements with partners like the U.K., Japan, and Indonesia helped reduce some uncertainty, yet the administration’s tariff actions—doubling steel import duties to 50% in June and planning a 50% levy on copper by August—are adding cost pressure and keeping supply chains on edge.
Meanwhile, the newly enacted One Big Beautiful Bill Act (BBB) is reviving generous tax incentives for manufacturing as well as research and development (R&D).
Materials
In Q2 2025, construction material costs showed a mixed pattern. Steel and other metal-related materials increased the most, as import tariffs appear structural and were doubled in early June.
Overall, construction material cost inflation remained partially offset, but critical materials are seeing gains. Tariff policy and commodity swings are likely to keep contractors alert to sudden price shifts.
Labor
Construction roles remain historically tight, though conditions have cooled from the extremes seen in 2022.
While recent easing in demand has provided modest cost relief—suggesting hiring may have caught up or project activity has cooled—labor availability remains a challenge. Any renewed upswing in construction would likely reignite worker shortages and add upward pressure on bid prices. In short, labor constraints have moderated but haven’t gone away.
What do current market conditions mean for our escalation forecasts?
The overall rate of construction escalation has been influenced by several drivers. Key trends informing our escalation forecasts are:
- Current activity: total construction spending remains near historic levels but has contracted over the last few quarters. Continued growth in public spending, further supported by tailwinds from the BBB, will help offset weaker private demand.
- Capital: elevated financing costs are limiting private projects, capping upside pressure while also delaying broader cost relief.
- Materials cost and availability: the composite basket shows flat year-over-year growth as declines in lumber, concrete, and asphalt costs offset increases in steel, rebar, and copper.
- Labor: craft wages continue to outpace the consumer price index (CPI), and while job openings have eased, availability remains tight.
- Machinery and equipment: heavy-equipment inflation has cooled year-over-year, though generators still carry premiums.
- Trade policy: steel and pending copper tariff increases are adding upward pressure on escalation projections.
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