US market intelligence: in transition
Our Q2 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 entered mid 2025 on firmer ground than the winter data projected. Real GDP reversed a small contraction in Q1 with a healthy rebound in Q2, helped mostly by a smaller trade deficit. Domestic demand expanded more slowly, yet disinflation continued. With inflation trending toward target, the Federal Reserve has kept its policy rate unchanged since December.
New accords with partners like the UK, Japan and Indonesia tempered some uncertainty, yet the administration’s tariff moves, doubling steel import duties to 50 percent in June and planning a 50 percent levy on copper by August, are adding cost pressures and keeping supply chains on edge.
Meanwhile, the newly enacted One Big Beautiful Bill Act (BBB) is reviving generous tax incentives for manufacturing as well as research and development (R&D).
Materials
In the second quarter of 2025, construction material costs showed a mixed pattern. Costs for steel and metal-related materials have increased the most, as import tariffs appear to be structural and were doubled in early June.
Overall, construction material cost inflation remained offset to a degree, but critical materials are seeing gains. Tariff policy and commodity swings should keep contractors alert to sudden price shifts.
Labour
Construction roles remain historically tight, though this has cooled since 2022’s extremes.
While recent demand easing has provided modest cost relief, which suggests hiring may have caught up or project activity has cooled, labour availability remains a challenge. Any renewed upswing in construction would likely reignite worker shortages and upward pressure on bid prices. In short, labor constraints have moderated but not disappeared.
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: total construction spending remains near historical levels but has contracted the last few quarters. Continued growth in public spending, buoyed further by tailwinds from the BBB, will help offset weaker private demand.
- Capital: elevated financing is limiting private projects, capping upside pressure but also delaying any broad cost relief.
- Materials cost and availability: the composite basket shows flat quarter-over-year growth as falling lumber, concrete and asphalt costs offset steel, rebar and copper increases.
- Labour: craft wages outpace consumer price index (CPI), and job openings have eased but availability remains tight.
- Machinery and equipment: heavy-equipment inflation has cooled year-on-year, though generators still carry premiums.
- Trade policy: steel and pending copper tariff increases are adding upward pressure on escalation projections.
