US market intelligence: a pivotal moment
Our Q4 2024 US market intelligence report provides market and regional analysis for the region, as well as economic insights from our team of experts.
Economic and construction market overview
The US economy remains in a position of strength. Gross domestic product continues to grow in Q3 2024, inflation has been moderated and recent rate cuts are encouraging for stimulating economic growth.
However, the US construction industry has decreased in Q3 2024, with spending falling across several sectors. Leading indicators suggest the current slowdown may persist in the short term. Even so, optimism remains, driven primarily by order book and pipeline activity.
There are many unknowns going into 2025 that may change the trajectory of the construction industry and bid prices. Further rate cuts combined with a positive trend in the ‘return to office’ drive could stimulate growth in the construction market. This is impacting businesses decisions on workspace requirements, along with conversations on the future of the workplace.
In summary, there is optimism in the US construction market against a backdrop of change and uncertainty.
Input costs growth continues to soften
Materials
Construction material costs have decreased as demand has cooled. Structural steel and lumber have declined from the highs of 2022. Additionally, there has been an overall improvement in the supply chain in 2024, with the main exception being electrical items, such as copper cables, panels, transformers, and switch gears.
Moving forward into 2025, the incoming presidential administration has continued to signal that they will raise tariffs on imports. If such tariffs are implemented, this could put upwards pressure on material costs.
Labour
The tight labour market has shown further signs of easing this quarter. Slow demand and moderated inflation have eased construction wage growth. Although the difficulty of acquiring labour has decreased this quarter, skilled labour continues to be an ongoing concern for many firms.
What do current market conditions mean for our escalation forecasts?
Construction escalation pressures are not as strong as they once were, with bid price growth increasing at a slower pace. Isolated hot spots exist, but tenders are becoming increasingly competitive, with spreads narrowing and submission numbers increasing. However, escalation hasn’t yet seen a reduction overall, just a softening of growth rates.
Factors informing our escalation forecasts are:
- Current activity: the US economy is on track for soft landing and resilient growth. Construction is less strong, depending on sector and location.
- Leading indicators: early trends suggest a slower start to 2025, with an uptick later in the year. Despite this, optimism remains.
- Materials cost and availability: Q3 2024 saw further reductions in general. Geopolitical risks may temper production cost reductions as companies increase risk allowances. Energy costs may add further pressure.
- Workforce: wage growth is being tempered. However, skills shortages persist, particularly for large projects and programmes in desirable sectors and locations.
- Machinery and equipment: there is steady easement in cost. Growth should continue to transition downwards as interest rate changes filter into lease costs and/or credit for expenditure.
