April 2026 CICPAC Economic Newsletter: Construction Industry Outlook
Published on by Eric Goodman in Construction
- Economic volatility is the defining theme as slow GDP growth (1.3%) and geopolitical shocks create a highly uncertain outlook for construction.
- Oil shock and supply chain disruption are driving instability with prices spiking above $100/barrel and critical material shortages expected to take quarters to normalize.
- Material costs and availability are worsening as construction input prices hit record highs (+6% YoY) and lean inventories amplify shortages.
- Labor shortages remain a structural problem despite available workers, with skilled trade gaps pushing wages higher and delaying projects.
- Transportation and logistics costs are surging due to extreme capacity constraints, increasing delivery costs and extending lead times.
- Growth opportunities are concentrated in key sectors like data centers, power, and manufacturing, even as broader construction activity remains flat.
The construction industry is navigating one of the most complex economic environments in recent memory. From geopolitical shocks to shifting tariff policy and a persistent labor crunch, the April 2026 CICPAC Economic Newsletter paints a picture of a sector that is resilient but under significant pressure. Here’s our team’s breakdown of the most important themes and what they may mean for your business.
The big picture: a volatile economy
GDP growth for Q1 2026 came in at a sluggish 1.3%, the slowest pace since Q1 2025. Earlier in the quarter, some economists projected growth as high as 2.5%, but the Iran conflict and the resulting oil crisis quickly erased that optimism. The Federal Reserve held rates steady at its most recent meeting and is expected to trim only 25 basis points in 2026 if conditions hold. The broader economic outlook remains mixed, with private forecasts ranging from 2.4% to as high as 3.5% to 4% depending on several key variables.
The Iran conflict & the oil shock
To no one’s surprise, the closure of the Strait of Hormuz was a defining event of the quarter. Oil prices spiked above $100 per barrel after hovering between $50 and $60 just months prior. The conflict did not just affect fuel costs; it disrupted global supplies of petrochemicals, fertilizers, helium, bromine, and a wide array of materials critical to construction and manufacturing. The result has been a supply chain in near-total disarray.
At the time of the CICPAC newsletter’s publication, a ceasefire agreement had been reached and the Strait was reopening, though in subsequent weeks the situation has remained volatile. Oil prices dropped 11% immediately. However, analysts warn that supply chain recovery will take “quarters, not months,” particularly for refined fuels, as refinery infrastructure in the Persian Gulf will require substantial time to restore.
Construction material prices reach a new peak
Your materials invoices aren’t going to get any smaller. The Producer Price Index for Construction Materials rose 6.0% year-over-year through March and hit an all-time high of 354.9 points. Month-over-month, it climbed 0.8%. Copper is a particular pressure point, with COMEX prices near $5.76 per pound (up approximately 32% year-over-year) driven by AI data center demand, global defense buildout, and Chinese smelter reductions.
The concern is not just price, but availability. Distributors have operated with lean inventories for years, meaning a disruption at a single mill, port, or fabricator can translate almost immediately into job-site shortfalls with very little time to find substitutes.
Tariff uncertainty continues, but clarity may be coming
The tariff landscape remains in flux. The current Section 122 tariff expires on July 24, and Section 301 investigations launched in March are expected to produce new, potentially higher and more durable replacement rates before that deadline.
A period of public comment in May and early June should begin to provide purchasing managers with more certainty heading into the second half of the year. Construction leaders should monitor these developments closely and consider what tariff exposure exists in their current project pipelines and material contracts.
Labor: a shortage that’s not going away
The Employment Cost Index for construction rose 4.3% for the full year and accelerated to 0.7% in Q4 alone, a pace expected to continue into Q1 2026. Despite roughly 7 million Americans currently looking for work, the skilled labor shortage remains acute. Workers with the specific trade skills the construction industry needs simply aren’t available in sufficient numbers. This mismatch continues to put upward pressure on wages and project timelines alike.
Transportation costs surge
Likewise, the transportation sector is under intense strain. The load-to-truck ratio has not been this elevated since the pandemic: there are more than 80 loads for every available flatbed truck. Spot freight prices are up 4.5% to 9% depending on the lane, and fuel surcharges are 57.7% higher year-over-year. Trucking was the fastest-growing freight mode, up 6.7% year-over-year, as shippers migrated away from more expensive air and maritime options. For construction firms, this means higher delivery costs and longer lead times are likely to persist well into the year.
Residential construction: waiting on the 10-year Treasury
Total residential construction was up 2.3% year-over-year in January but dipped 0.8% month-over-month. The story of the residential market is increasingly tied to a single benchmark: the yield on the 10-year U.S. Treasury bond. When that yield briefly dipped below 4.0% in early February, mortgage rates fell below 6%, triggering a 128% year-over-year surge in refinancing activity and an 8% increase in new mortgage originations. Today, the 10-year yield sits at approximately 4.32%, keeping the market constrained.
Custom home builders are faring well, with backlogs stretching into 2027. Spec builders, however, remain cautious. The monthly supply of homes reached 9.7 months (the highest since 2022) against a balanced market benchmark of roughly 6 months. The structural demand remains enormous, with estimates of 2 to 3 million homes needed to meet demand over the next two years in a market that typically produces only 1.6 to 1.7 million annually. Multi-family housing has been the standout performer, posting a 29.1% gain in pace.
Non-residential construction: strength in select sectors
Total non-residential construction spending was essentially flat year-over-year in January at $1.245 trillion, but certain sectors are driving strong growth. Data center construction is growing at nearly 32% year-over-year with a strong outlook through 2028. Power generation, advanced manufacturing, healthcare, and higher education construction are also performing well. Infrastructure spending under the IIJA is growing at high single-digit rates.
Weaker areas include general commercial, office, and certain low-tech structures. The broader non-residential sector is expected to remain flat through much of 2026 before new acceleration emerges late in the year and into 2027. An estimated $2 trillion in inbound investment is projected for 2026 and 2027, with more than $5 trillion expected before the end of the decade. Many shovel-ready projects are currently waiting on power accessibility before breaking ground.
Credit conditions: accommodative, but not loose
Bank tightening was mixed in Q1. Approximately 5.3% of large and mid-sized commercial firms experienced tighter conditions, and 8.9% of smaller firms saw tightening. The American Bankers Association’s Credit Conditions Index remained below 50 for the fifth consecutive quarter, signaling expectations of deteriorating conditions over the next six months. That said, traditional credit availability remains solid for qualified borrowers, and the overall environment is best described as “accommodative for most projects seeking funding — at a cost.”
Looking ahead
The path forward for the construction industry depends on several converging factors: the resolution of geopolitical conflict and its impact on supply chains, the trajectory of the 10-year Treasury yield and mortgage rates, clarity on tariff policy after July, and the ongoing challenge of finding skilled labor.
The volatility is real, but so is the opportunity. Long-term demand drivers in data centers, power generation, healthcare, and reshoring remain compelling, and the firms that plan proactively and manage risk carefully will be best positioned to capture that growth.
If you have questions about how these economic forces affect your construction business – whether it’s tax planning around materials cost increases, managing cash flow through project delays, or planning for workforce-related cost changes – the Barnes Dennig construction team is here to help. Contact us today to start the conversation.
More resources
Want the full CICPAC April Economic Newsletter? You can download it here for even more insights and explorations. You may also be interested in our recent blog on Why Your Construction Backlog is a Secret Weapon, or this article unpacking What the S-Curve Analysis Reveals About Construction’s Financial Future.
Also stay tuned for our newest Construction Compensation & Benefits Benchmarking Report this June, packed with insights to keep your company’s recruiting and retention practices competitive in a challenging labor market. Check out the 2024 edition for a sneak peek of what to expect from this year’s study.
