The final quarter of 2025 unfolded in unexpected ways. Labor conditions weakened meaningfully but then leveled off, while inflation edged lower at year-end for the first time in several months. The Federal Reserve implemented two interest rate cuts, equity markets continued to be shaped by outsized gains in AI-related stocks, and disruptions in government data reporting limited visibility into key economic indicators. Despite subdued consumer confidence and modest wage growth, household spending held up, helping drive full-year economic growth to an estimated 2.5%.

Within the construction sector, cost pressures ran slightly above historical norms. Material escalation, particularly in steel, copper, and aluminum, accounted for most of the increase, and a growing share of trades reported rising labor and input costs compared to the prior quarter. Backlogs generally remained stable, while competitive bidding intensified across more segments of the market.

Looking ahead, the combined direction of fiscal and monetary policy suggests continued economic expansion and a supportive environment for construction demand. Workforce availability is expected to remain constrained throughout the year, and select materials — most notably mechanical and electrical equipment — are likely to remain challenging due to extended lead times and upward price pressure.