After five years of strong gains totaling over 40%, FMI forecasts a much cooler 2% increase in U.S. construction spending in 2025. While still positive, this slowdown reflects broader economic headwinds and marks a shift to more moderate, sustainable growth.
Key Trends and Insights
- Economic Pressures Ahead: Despite ongoing recession risks, construction spending is expected to grow modestly—though inflation may offset perceived gains.
- Industry Resilience: Federal investments and evolving monetary and trade policies are helping stabilize the industry, even as growth returns to historical norms.
- Single-Family Housing Recovery: Lower interest rates and potential housing policy reforms are boosting this critical segment, helping drive broader demand.
- Multifamily Slump: Overbuilding, high vacancy rates, and tight financing are causing this sector to contract, impacting related markets like retail, lodging, and office space.
- Infrastructure Leads the Way: Backed by bipartisan funding and upcoming reauthorization of Infrastructure Investment and Jobs Act (IIJA) programs, infrastructure remains a bright spot, especially in water, power and transportation.
- Stable but Cautious Growth in Nonresidential Sectors: Health care, education and public safety construction remain steady, though cautious due to funding and cost challenges.
2025 Sector Performance Snapshot
- Top Growth Areas (5–10%):
Residential improvements, religious, recreation, power, water, sewage and waste disposal. - Stable Sectors (0–5%):
Single-family residential, office, education, health care, transportation and highways. - Sectors Facing Declines:
Multifamily residential, lodging, commercial, manufacturing and public safety.
Market Sentiment Drops Sharply
FMI’s Nonresidential Construction Index (NRCI) plummeted from 56.9 to 43.5 in Q2 2025—its lowest reading since 2020. Industry leaders cite rising costs, declining backlogs and growing uncertainty.
What This Means for You
The construction industry is entering a more mature phase of the cycle. Now is the time to reevaluate strategies, understand shifting client and competitor behaviors, and prepare for long-term opportunities in infrastructure, innovation, and smart growth. Despite short-term uncertainty, the outlook remains solid for players ready to adapt.