contractors reported recent supplier notices of higher prices, often associated with iron and steel, copper wire, cable and other elements. For example, ABC economists note that iron and steel prices are up 9.2% year-over-year, and copper wire and cable prices are up 13.8%. ABC consultants highlight that multifamily construction materials costs have begun accelerating again, up 2.5% since January 2025, the largest six-month jump since late 2022. They also note that cost escalation remains elevated, and that even if month-to-month changes seem modest, the cumulative pressures matter deeply for project feasibility. Thus, firms are facing a dual challenge: moderate monthly inflation in inputs, but sizeable cumulative cost escalation and uncertain pass-through to project owners. This raises risk of profit margin losses, project delays or outright cancellation. Some Sector-Specific Observations Data Centers and Tech-Related Construction Everyone is talking about data centers. Data centers, data centers, data centers! They are a bright spot as private data center construction spending has increased by roughly $15.2 billion since the start of 2024, while all other private nonresidential spending declined by about $52 billion over the same time frame. ABC economists observe that about 1 in 7 ABC members is currently under contract on a data-center project. This suggests that for firms positioned in that niche (tech/wholesale data centers), there is a meaningful growth driver despite broad softness in nonresidential construction. However, there is always a place for caution, as the sustainability of these investments depends on actual returns from AI/data infrastructure, which remain unclear right now. Factory/Manufacturing Construction Factory construction has faltered, unfortunately, despite the earlier narrative of reshoring and government-driven incentives. This signals that the goods-side construction rebound may not be as strong or broad as expected. For contractors oriented toward manufacturing or industrial builds, caution is warranted. Healthcare and Institutional Construction There also appears to be softness in institutional/health-care builds, according to ABC consultants. While healthcare is typically a resilient segment, that may be shifting given slower fundamentals (capital spending by health systems, deferred expansions). This exacerbates the challenge for commercial/institutional contractors already facing tight owner budgets and elevated costs. Multifamily Residential/Multifamily Cost Pressure Though residential single-family continues to struggle, multifamily remains better positioned — but cost pressures are increasing as previously noted. For firms engaged in multifamily construction, careful cost control and contingency assumptions are increasingly important. Key Takeaways for Q3 2025 • Employment growth in construction is weak and even negative in recent months; job openings are down substantially, implying demand softening. • Backlog remains elevated but is beginning to decline, particularly for smaller contractors; spending in nonresidential is showing slight contraction. • Cost inflation — both materials and labor — remains a drag and increasingly a risk to project margins. • Some sectors (data centers) continue to provide growth pathways, but many traditional segments (manufacturing, healthcare, institutional) are showing signs of strain. • The industry is shifting from growth-expansion mode toward defensiveness: cost discipline, pipeline quality, exposure management and labor strategy will determine winners and losers. In sum, Q3 2025 is marked by a plateauing and gradual softening of what has been a strong run for the construction industry. The good news is the industry is not collapsing of course, as backlog remains high. 42
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