As uncertainty continues to plague the economy as a whole, industry experts note the effects on construction trends as materials prices, labor woes and other concerns cause turmoil.
“The U.S. economy has slowed considerably in 2025, alongside stagnant consumer spending, a cooling housing market and a weakening job sector,” says Sarah Martin, associate director of forecasting at Dodge Construction Network. “The construction industry came roaring into 2025 on the back of large government investments, including the Infrastructure Investment and Jobs Act (IIJA) and the CHIPS Act, which promoted investment in the domestic semiconductor industry. Further acceleration came from outsized private-sector investments in data centers to support cloud and AI technology.”
However, as the economy has cooled, so has construction activity, says Martin. “The Trump administration’s shifting trade policies have made it more challenging to establish the effective tariff rate and to project its trajectory over the next several months. Dodge’s project planning data indicates that developers and owners continue to place new projects into the pipeline, but they are slow rolling the planning process.”
Dodge reports that overall starts are up 2% through August, compared to 7% in the same time period in 2024. In the residential sector, starts are down 5%. This can be largely attributed to a decline in the single-family market, according to Dodge data. “While buyers may have been willing to stretch their budgets to enter the housing market in 2024, the growing risk of recession and a weakening labor market are compelling many potential buyers to pause home buying plans,” says Martin.
Conversely, the multifamily market has been “steadily gaining steam,” up 10% through August. The largest multifamily projects to start work were the $619-million Kuilei Place Mixed-Use Residential Tower in Honolulu and the $413-million 120 Brickell Residences in Miami.
Non-residential starts increased 3% through August, with data centers continuing to drive growth in the sector, at a rate of 25% year-to-date. Health care is another bright spot, with a 27% increase, according to Dodge data. Hotel construction, however, has slowed, dropping 7% in the same time period, while manufacturing “continues to face significant volatility,” says Martin. “After experiencing a strong slowdown in the first quarter, activity sharply rebounded in the following three months. Unfortunately, over the last two months, activity has slowed down once again alongside rising tariffs and severe labor shortages.”
Institutional starts fell 1%, according to Dodge, which Martin notes as primarily owed to a drop in the education sector. Overall, the largest non-residential projects to start work in August were the $880-million Geisinger Medical Center Tower in Danville, Pa., and the $666-million Fort Meade East Campus Office Building in Fort Meade, Md.
Non-building starts increased 8% year-to-date, spurred by utilities and highway and bridge construction, up 13% and 8%, respectively. Environmental public works, mostly consisting of water and sewer construction, fell 3%, after strong growth for several years prior. Among the largest non-building projects to break ground in August were the $5.1-billion Woodside Louisiana LNG Facility [Train 3, Phase 1] in Sulphur, La., and the $2.9-billion Cheniere Corpus Christi LNG Facility [Trains 8 and 9, Stage 3B] in Gregory, Texas.
Tariffs Cause Materials Price Hike
“We appear to be in the early innings of a jump in construction prices, which is not particularly surprising given the administration’s current tariff policy,” says Michael Guckes, chief economist at ConstructConnect. “Last year, prices were flat to slightly down, according to the Bureau of Labor Statistics. In the most recent months, however, we have seen construction materials inflation jump to over 5% [as of August].”
He adds: “While the focus in the news earlier this year was on steel, aluminum and lumber tariffs among others, these products don’t have particularly high levels of imports relative to total U.S. consumption. On the other hand, products such as control panels and nuts, bolts and screws are majority supplied by importers and for this reason are more likely to see tariff costs largely—or even wholly— passed along to U.S. consumers.”
As for steel, S&P Global Market Intelligence’s third quarter forecast predicts rebar prices will rise 4.9% in 2025 before falling 1.8% in 2026, while structural shapes are forecast to increase 3.8% this year, with a 6.1% drop expected next year. “Prices for rebar, structurals and other construction steel grades will trend downward in the United States,” says John Anton, economics director at S&P Global Market Intelligence. “Prices rose sharply on tariffs and are now in a bit of a give-back. Declines will be slow as mills are being careful to try and match output to construction demand.”
