US market intelligence: slowing down
Our Q3 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 is weakening, despite resilient preliminary Gross Domestic Product growth figures being recorded in Q2 2024. For now, weakening does not indicate an expected recession or downturn, but a reduction in the pace of economic growth and greater slack in the labour market.
The US construction industry is by no means safe from softening, and may even lead the curve, with a slew of indicators suggesting that 2024 will experience benign growth overall and 2025 could slow further.
The same can be said of industry pricing. Should the economy contract, that would be a typical leading indicator for industry bid price corrections. In the absence of that, construction costs continue to increase albeit less than before.
The overall picture is one of a slowing, but still growing, construction industry operating within a wider economy that is hopefully geared up for a soft landing.
Optimism remains, despite slow down
The US construction industry is slowing down, with high interest rates acting as a barrier to growth. Many speculate that September 2024 could see the first interest rate cut in four years, however, offering hope of improved market conditions.
Such a decrease is unlikely to significantly boost construction activity in the short-term, or instantly increase credit availability and cash flows. While stock markets can shift within minutes, it takes time for investors to change tact and contractor balance sheets to improve. The positive impact of interest rate reductions on construction activity may be lagged by at least a year.
Market conditions shaping escalation forecasts
Construction escalation has tempered slightly yet bid price growth continues to increase. This means that escalation is not falling and bid prices (on average) are not lower than what they once were – they are still rising.
Factors informing our escalation forecasts are:
- Current activity: the US economy is cooling, and its construction industry is softening. Growth is still prevalent, but variable by sector and location.
- Leading indicators: data is trending downwards and confidence is constrained, although construction permits have improved.
- Materials cost and availability: global commodity and freight cost are amplified, but domestic costs and lead-in times have settled amidst softer demand.
- Workforce: skills shortages persist and wage gains remain elevated. The labour market is not as tight as it once was and that should edge down earnings growth over time.
- Machinery and equipment: little change other than small reductions are easing some price pressures. Key items remain scarce and costly.
