Industry outlook
Positive outlook for construction
Rate cuts and economic growth have forecasters predicting sizable industry increases in 2025, with expansion across most market sectors
In late 2023, the Federal Reserve indicated it was done raising rates, which led to a positive outlook for 2024 by construction industry forecasters. Not only did the Fed pause rates, but it also cut rates, promoting growth and giving the forecasters an even rosier picture for 2025.
“On the economic side, the U.S. economy posted healthy growth in 2024 and is expected to continue in 2025,” according to Dodge Construction Network’s “Outlook 2025” published in November.1 “Perhaps most significant for the construction outlook is the Federal Reserve’s changing stance on interest rates. In September, it initiated an aggressive 50 bps (basis points) cut in its policy rate. This rate change will begin to positively impact the economy, particularly in interest-rate-sensitive industries such as construction, during 2025.”
By the numbers
- Total construction: Dodge +9%, ConstructConnect +8.5%, FMI +2%
- Residential: Dodge +12%, ConstructConnect +12%, FMI +1.3%
- Non-residential: Dodge +6%, ConstructConnect +8%
- Highways: Dodge +14.2%, ARTBA +11.5%, FMI +3%
- Bridges: Dodge +11%, ARTBA +8.9%
Dodge, North America’s leading provider of data and analytics for the construction industry, forecasts:
- A 9% increase in the value of total construction starts, up to $1.3 trillion1
- Residential starts rising by 12% to $441 billion1
- Non-residential rising up 6% to $467 billion1
- A 9% bump in infrastructure to $368 billion1
Dodge predicts an increase in each segment of every category with the exception of warehouses and other non-residential in the non-residential sector, where it sees a drop of 0.5% and 10.5% respectively.2 Other segment data from Dodge:
- Stores and shopping centers lead non-residential with a predicted increase of 16.6%2
- Hotels and motels follow closely with a 16.2% increase2
- In residential, multifamily housing leads the way with a forecasted increase of 15.7%2
Highway and bridge boost
The highway construction and bridge construction outlooks appear positive as well:
- Dodge sees a 14.2% and 11% growth, respectively2
- The American Road & Transportation Builders Association (ARTBA) expects a big bump in infrastructure with an 11.5% boost in highway construction2 and 8.9% in bridge work2
“Several states increased their own revenues to match federal funds and make additional transportation investments, using a combination of General Fund transfers, bond issues, business taxes and other user-fee increases,” said Alison Black, ARTBA Senior Vice President and Chief Economist, in an article by Engineering News-Record (ENR), “2025 Forecast: Rate Cuts Expected to Boost Construction.” 2
Longtime forecaster Fails Management Institute (FMI) also sees an increase in highways and streets, though not as big of a jump. It told ENR it saw:
- A 3% growth in highways and streets as part of an overall increase of 5% in the non-building structures category2
- The water supply sector as the prime mover in non-building at 7.8%2
- Forecast of an increase in the power sector of 6.4%2
- An increase in sewer systems of 5.3%2
Strong government spending
ConstructConnect Chief Economist Michael Guckes’ forecast, “US Construction Starts: 2025 Growth Forecast by Sector,” 3 sees:
- An 8.5% rise in total construction starts, led by residential construction with a 12% increase compared to 20243
- Growth within the residential sector at 13.1% for single-family housing and 9.5% for multifamily3
- Positive numbers for the non-residential sector (8% increase) and civil engineering (5.3% increase)3
“The growth forecast is driven largely by the positive economic outlook, strong government spending, and falling interest rates, which help to support growth in the residential and non-residential building sectors,” Guckes stated. “After two years of large declines, we expect total residential building to return to growth in 2025.”
Tariff impact
According to the National Association of Home Builders, President Trump’s proposed new tariffs on China, Canada and Mexico are projected to raise the cost of imported construction materials by $3 billion to $4 billion, depending on the specific rates, which will raise construction costs and harm housing affordability.4
As of Feb. 4, 2025, Guckes stated that “ConstructConnect maintains its positive outlook for the US and Canadian construction economies for 2025.” 5
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1. https://success.construction.com/l/844283/2024-11-19/c2l7bh/844283/1732045851UzyfWz8l/Outlook_2025_ebook_2.pdf
2. https://www.enr.com/articles/59861-2025-forecast-rate-cuts-expected-to-boost-construction
3. https://www.constructconnect.com/construction-economic-news/us-construction-starts-2025-growth-forecast-by-sector
4. https://www.nahb.org/advocacy/top-priorities/material-costs/how-tariffs-impact-home-building
5. https://www.constructconnect.com/construction-economic-news/tariffs-and-the-outlook-for-the-construction-economy
