I’m Will Roberson, JE Dunn’s economist. My job is to make sense of what the economy is doing — and what it actually means for construction. Here, I’ll share insights on the trends shaping our industry and I’ll do my best to do it without all the jargon that will have you pulling up Google to translate. This will be a regular cadence, alongside the perspective you see in our quarterly economic report, focused on what matters now and what’s coming next. If it affects costs, labor, schedules, or risk, we’ll cover it — plainly and with a little humor along the way.
The U.S. is expected to maintain moderate growth, with GDP expanding at a steady pace amid easing inflation and a stabilizing interest rate environment. Real GDP is forecast to expand by roughly 2% this year, an improvement from 2025’s slower pace of roughly 1.4–1.5%. This pickup reflects a more supportive policy mix –- fading tariff uncertainty, potential fiscal stimulus, and a Federal Reserve that is no longer actively pumping the brakes.
Inflation is expected to decelerate but remain slightly above the Fed’s long-term target, with core PCE inflation expected to land near 2.5–2.6% by the end of2026. In response, the Federal Reserve is likely to trim interest rates in early 2026. After ending 2025 with rates around 3.75%, most forecasts see the Fed funds rate settling in the 3.25–3.5% range by midyear. The labor market may soften further before stabilizing later in the year or into early 2027. Overall, the macro environment points to better footing, cooling inflation, and gradually easing financing conditions – a noticeable shift from the uncertainty and “higher-for-longer” mindset that defined much of 2025.
For non-residential construction, 2026 should mark a return to nominal growth, though performance will vary widely by sector. Construction material costs are expected to be less volatile overall, but targeted pockets of escalation (price and lead time) may persist in specialty products (looking at you, switchgear, transformers, industrial control equipment and HVAC components). Data center construction continues to stand out: assuming the AI-driven investment cycle remains intact, growth in this segment is expected to approach 20% in 2026. Healthcare and education construction should see steady, moderate growth, supported by demographic and public needs. Office and retail construction, however, remain challenged. Elevated office vacancies, remote-work dynamics, and looming debt refinancings are likely to constrain new office development, while cautious consumer spending and e-commerce competition continue to keep traditional retail development muted.
Risks to the outlook remain balanced but meaningful. On the upside, the stronger-than-expected fiscal support or more aggressive rate cuts could lift confidence and activity. On the downside, renewed policy uncertainty, geopolitical disruptions, or a sharp labor market correction could slow momentum. Longer term, structural concerns also linger: consumer spending is increasingly concentrated among high-income households, asset growth is heavily skewed toward AI and a small group of firms, and the resulting wealth effects largely bypass the broader economy. These dynamics remain background vulnerabilities as 2026 unfolds.
