US market intelligence: navigating trade headwinds
Our Q1 2025 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 currently points to moderate growth with a continued focus on global trade and controlling inflation. Consumer spending remains solid, but dampened consumer confidence and policy considerations around interest rates and tariff measures could reshape the landscape in 2025 and beyond.
Within this broader macro-environment, the construction industry is navigating both opportunities and challenges. Commercial and residential developments have shown some recovery, although this has varied for each region. Public infrastructure projects further reinforce a healthy construction pipeline, particularly for transportation and energy upgrades.
Industry pricing has been under inflationary pressure due to speculation about tariffs and their eventual impact. As a result, costs are expected to rise, and risk allowances will increase.
Trade disputes have complicated market proceedings, but industry sentiment remains positive and pragmatic, with stakeholders monitoring policy shifts, global trends and costs.
US policy measures could impact post-COVID-19 input cost recalibration
Materials
Construction material costs registered a modest 0.4 percent increase on the quarter in Q4 2024 following two consecutive quarterly contractions. Lumber was an outlier, surging by 4.4 percent on the quarter. This coincided with increased demand from homebuilders to cater for rebuilding and repair needs, following several natural disasters across America.
The overall material cost picture is likely to shift, as recent tariffs imposed by US President Donald Trump threaten to drive costs higher. Specifically, tariffs on steel and aluminum will raise costs for both raw and finished products, leaving contractors in the position to either absorb increases or pass them on to project owners.
Labour
The labour market continues to moderate with construction wage growth softening as overall demand tempers. The labour market continues to moderate with construction wage growth softening as overall demand tempers. Average hourly wages and weekly wage growth declined from 4.4 percent in Q3 2024 to 3.9 percent in Q4 2024, reflecting dampened 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 US economy is growing steadily, and the construction industry reversed its shortfall in Q3 2024. Performance is sluggish overall, though, despite pockets of strong demand.
- Materials cost and availability: material costs have stabilised, but recent tariffs on steel and aluminium could drive costs higher.
- Workforce: wage growth has moderated. Yet, labour shortages persist, particularly in skilled trades, exacerbated by potential immigration policy changes.
- Machinery and equipment: high capital costs and elevated interest rates continue to impact the affordability of machinery and equipment, but price pressures are alleviating.
