What’s Ahead for Construction: Key Trends and Insights
Published on by Travis Knight in Construction
The construction industry’s optimism is fading fast, with business leaders now facing one of the steepest declines in confidence seen in years, driven by rising costs, project delays, and trade pressures. FMI’s latest Construction Industry Round Table (CIRT) Sentiment Index highlights a notable shift in outlook between the first and second quarters, underscoring the need for proactive planning in an uncertain market and strategic flexibility in the months ahead for construction firms and business owners.
Q2 2025 sees reduced confidence levels
The year began on a high note, with Q1’s Sentiment Index climbing to 67.9, its highest level since 2021. However, early signs of caution appeared as the Design Index slipped to 61.8, signaling hesitancy in project planning.
By Q2, confidence had declined sharply. The Sentiment Index fell to 54.0, and the Design Index dropped further to 44.9, one of the steepest quarterly declines in the index’s history.
Tariff and supply chain disruptions
Tariffs emerged as a key disruptor this spring, particularly during heightened U.S.–China trade tensions. Nearly 50% of respondents reported project delays or cancellations in Q2. About 18% have already experienced significant disruption from tariffs, while 46% anticipate further near-term impacts.
Labor market pressures
Labor availability continues to challenge firms. In Q1, over 53% of respondents reported that their labor force was insufficient relative to backlog demands, and by Q2, half of firms were reevaluating their hiring plans for 2025. Of these, 41% expect lower demand for labor, while 36% anticipate increased hiring needs, a clear sign of divergent strategies across the industry.
Long-term tariff outlook
While 58% of firms expect tariff-related issues to resolve within 12 months, nearly a third believe disruptions will last into 2026. The industry is divided on the potential benefits of current trade disputes: 38% of executives are optimistic about stronger, more balanced global trade agreements, but an equal proportion remain skeptical or uncertain.
What this means for business owners
These findings highlight both challenges and opportunities for construction leaders:
- Mitigate Supply Chain Risks: Consider diversifying suppliers and exploring domestic options to reduce exposure to tariff-related disruptions.
- Protect Margins Through Contract Strategy: Strengthen contract language around pricing and scheduling, an approach already adopted by 70% of firms.
- Build Workforce Flexibility: Given mixed hiring outlooks, develop scalable staffing plans to align with market conditions.
- Plan for Volatility: Build contingencies into budgets and timelines to manage the ripple effects of geopolitical and economic uncertainty.
Looking forward
The Q2 survey coincided with peak U.S.-China trade tensions, which eased slightly after the survey closed. Whether confidence rebounds in Q3 remains to be seen. For now, construction firms that stay agile, adapt to market shifts, and invest in proactive planning will be best positioned to navigate the uncertainty ahead.
Have questions about how these trends could impact your projects or business strategy? Contact us today for a free consultation with one of our construction industry advisors. You can also explore our latest insights on the CICPAC construction industry outlook and strategies for thriving in an evolving market. As always, we’re here to help.
