Our H1 2026 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
Despite slower economic growth and declining construction spending, construction costs continue to rise across much of the U.S. construction market. Our latest U.S. Market Intelligence report finds that labor constraints, higher materials costs, energy volatility and trade policy pressures are sustaining escalation even as overall demand softens.
The result is a market that is narrowing rather than contracting. Activity is becoming increasingly concentrated in power, data centers, infrastructure, healthcare and aviation projects, while financing-sensitive sectors continue to face headwinds.
Construction activity slowed through the first half of 2026, with total construction spending declining 3.1% year-over-year in June. At the same time, rising energy costs, tariffs, and ongoing labor constraints have accelerated input-cost inflation, creating a difficult backdrop for owners, developers, and contractors.
The latest report shows construction material costs increased 10.7% year-over-year in July, the fastest pace since 2022, driven largely by fuel prices and continued pressure on metals and imported building materials.
This divergence between demand and cost is one of the report's most significant findings. While total construction spending remains below year-ago levels, cost escalation is being driven by competition for skilled labor, electrical equipment, energy-intensive materials and specialist supply chains.
Why we have increased our escalation forecast
Construction pricing remains caught between competing forces. Costs are re-accelerating while demand cools, and labor is not loosening with it. Key trends informing our forecasts include:
Current activity – Spending is 3.1% below prior-year levels and weaker in real terms, with residential falling alongside private nonresidential.
Capital – Interest rates have remained elevated as renewed inflation pushes out expectations for further cuts.
Materials cost and availability – The composite hit 10.7% year-on-year in July, with the diesel PPI up 46.3% on that same basis, and Section 232 metals running 7.0% -20% across Q2.
Labor – Workforce growth has resumed, but demand for skilled labor remains high and job openings have increased every month since March.
Machinery and equipment – Cooled to 2.6% year-over-year, with cranes and forklifts negative. The fleet-cost risk is fuel.
Trade policy – Section 232 metals duties remain in force and visible in prices, August's 50.0% duties on Canadian plywood, engineered wood and cement add a second front, and the conflict premium is a volatile layer on top of both.
Bid-price escalation - Reflecting these market dynamics, our national bid-price escalation forecast for 2026 has increased to 4.75%, up from 4.25% in our previous report. The increase reflects accelerating input costs rather than stronger market volume.
One of the most notable shifts identified in the report is that power has overtaken manufacturing as the largest non-residential construction sector in the United States. Continued investment in power generation, grid infrastructure and data-center-related development is reshaping demand patterns across the market and increasing competition for critical resources.
While national conditions remain mixed, regional performance is becoming increasingly concentrated around a small number of sectors and major capital programs. Semiconductor investment continues to shape Phoenix, mission-critical and data-center development remains dominant in Dallas-Fort Worth, healthcare, energy and major capital programs continue to support demand in Houston, while aviation and port infrastructure continue to drive activity across Florida.
For owners and investors, the implication is clear: softer market conditions should not be mistaken for broad pricing relief. Construction demand may be moderating, but competition for skilled labor, electrical equipment and critical materials remains intense. As activity concentrates into fewer sectors and regions, escalation is likely to remain elevated through 2027.
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