The Preconomist

Real GDP grew 1.5 percent in the second quarter, down from 2.1 percent in the first, according to the advance estimate released by the Bureau of Economic Analysis. Investment continued to grow, driven by equipment and intellectual property products, but nonresidential structures investment declined for the tenth consecutive quarter. The headline number says the economy is still expanding. The composition of growth suggests a growing share of that investment is flowing somewhere other than new buildings. What did the headline GDP number show? Real GDP rose 1.5 percent in Q2, down from 2.1 percent in Q1. The deceleration reflected a downturn in government spending and slower growth in investment and exports, partly offset by an acceleration in consumer spending, according to BEA. What happened inside investment? The increase in investment primarily reflected increases in equipment and intellectual property products, partly offset by decreases in private inventory investment and non...

Two widely followed construction indicators softened in their latest readings, but the combined message is less about contraction and more about moderation. The Associated Builders and Contractors (ABC) Construction Backlog Indicator, which measures work already under contract, declined modestly in June. The AIA/Deltek Architecture Billings Index (ABI), a leading indicator of future construction activity, also reported a slight decline in architectural firm backlog during the second quarter. At first glance, that appears concerning. A closer look suggests the construction pipeline is cooling, not cracking. What did the ABC Backlog Indicator show? ABC's Construction Backlog Indicator fell to 8.8 months in June from 9.1 months in May. While backlog declined month-over-month, it remains slightly above year-ago levels and higher than any reading recorded between September 2023 and April 2026. Infrastructure remains the strongest segment at 10.1 months of backlog, followed by heav...

The Bureau of Labor Statistics released June 2026 Producer Price Index data this week. The headline for construction: nonresidential input costs decelerated to 7.1% y-y, down 130 basis points from May's 8.4% print. The chart below tracks two lines. One tracks wholesale resource costs; the other tracks final bid pricing. In June, outputs held at 3.5%. The spread between those two figures is 360 basis points. The gap is narrower than last month, but has not closed. What is driving the deceleration in inputs? America may run on Dunkin’, but construction runs on diesel. June's CPI report showed energy costs pulling headline inflation lower, and construction inputs followed. Diesel fell sharply in June, and fuel-sensitive categories moved with it. That is the cooldown visible in the chart, not a broad retreat in materials pricing. When energy leads a deceleration, relief is real but it is also the most reversible and volatile component of the index. Did anything move in ...

The tariff conversation in construction has mostly been reactive. A rate goes up, costs move, owners ask questions after the fact. What is unfolding right now is different. The administration is not oscillating on tariffs. Instead, it is rebuilding the legal architecture to make tariffs more durable. For construction budgets, that distinction matters more than any single rate announcement. What happened after the Supreme Court struck down the IEEPA tariffs in February? The administration moved fast. Within three weeks of the February ruling, USTR initiated 60 parallel Section 301 investigations into trading partners' failure to prohibit imports of goods produced with forced labor. A temporary 10% global tariff under Section 122 went into effect as a stopgap. Section 122 has a hard 150-day cap, expires around July 24, and was never intended to be permanent. Section 301 currently appears to be the administration's primary replacement mechanism. Congress delegated that autho...

Real construction spending fell across nearly every category in May. Total real spending is down 0.9 percent month over month and 5.4 percent year over year. What is worth watching is the one category that had been holding the broader numbers up, data centers have also turned negative on a monthly basis for the first time this cycle.   Where is the pullback concentrated? Virtually everywhere. Nonresidential is down 1.0 percent month over month and 7.6 percent year over year. Manufacturing is the worst category, down 2.4 percent month over month and 25 percent year over year. Office (ex-data centers) is down 1.2 percent month over month and 15 percent year over year. Commercial, warehouse, lodging, and both private and public education categories are also negative. Multifamily and infrastructure are also negative year over year, down 0.8 percent and 1.9 percent respectively, but far more modestly than the categories above. They are softening, not collapsing. What about data cent...

Domestic steel capacity utilization sits well below the 85% threshold that historically signals a constrained market. Yet structural steel fabricators are quoting 36-to-40-weeks from award to the start of erection. The gap has an explanation that matters for planning projects in 2027. What Do the Data Show? The Federal Reserve's capacity utilization rate for iron and steel products (CAPUTLG3311A2S) ran at 75.5% in May 2026 (seasonally adjusted). That is a solid operating level but not one that would typically generate extended lead times on its own. The American Iron and Steel Institute reports capability utilization at 80.2% for the week ending June 20, using a different but related methodology that runs 3-to-5 points above the Fed measure. Both series point in the same direction. The market is operating above its recent baseline but below levels associated with broad supply constraints. The import picture explains the gap between what the utilization rate suggests and what ...

The Bureau of Economic Analysis released the third and final estimate of first-quarter 2026 GDP this week. The headline landed at 2.1% annualized real growth, revised up from the second estimate's 1.6% and above the advance estimate's 2.0%. Markets received it as a mild positive surprise. The more important question is what actually moved the number, because the answer is not what a 2.1% print typically implies. The number went from 2.0 to 1.6 to 2.1. What explains that arc? Both prior revisions in this series were driven by what BEA calls source data maturation. The advance estimate is published roughly a month after the quarter closes and relies heavily on BEA assumptions where Census Bureau data is not yet available. The second estimate incorporates updated inventory and trade data. In Q1's case, that revision pulled the number down to 1.6% as inventory and consumer spending data came in softer than assumed. The final estimate moved the number back up to 2.1%. Th...

The Bureau of Labor Statistics (BLS) released May 2026 Producer Price Index data this week. For construction, two numbers define the month: nonresidential construction inputs rose 8.4 percent year-over-year, and nonresidential construction outputs rose 3.5 percent over the same period. The gap between those two figures is 490 basis points and has been widening for months. The input index tracks what contractors pay: materials, freight, equipment, and other goods consumed in the construction process. The output index tracks what contractors charge: the price of completed nonresidential construction delivered to owners. When inputs outpace outputs, the difference must land somewhere. It lands on margins. In May, nonresidential inputs rose 1.8 percent month-over-month. Nonresidential outputs rose 0.1 percent. The monthly spread is consistent with the annual one. This is not a one-month anomaly. It reflects a sustained period in which bid prices have not kept pace with cost escalatio...

The May jobs report landed this week with a headline that sounds good with 172,000 jobs added. This marks the third consecutive month of positive payroll growth with upward revisions to March and April totaling 93,000 jobs. The unemployment rate held at 4.3 percent. By any standard read, that is a solid report. When you read the Employment Situation along with the JOLTS report, they tell a more complicated story and we need to look past the headline before drawing any conclusions. What did the report show for construction specifically? Construction employment was essentially flat in May. BLS characterized it as "little change over the month," the same language used for manufacturing, retail, and several other sectors. The sector has added 65,000 jobs since January, which sounds healthy, but the monthly pace has cooled considerably. January alone accounted for 45,000 of those gains. The spring hiring that typically accelerates the sector's seasonal recovery has been mu...

CPI dropped Tuesday with PPI following on Wednesday. One measures what consumers are paying and the other measures what it costs to produce. Together they tell you something the headlines missed. CPI hit 3.8 percent in April, the highest in three years, driven by the Iran energy shock. But that is the consumer story, the construction story lives in the PPI, and it is not primarily about energy. PPI data shows nonresidential construction material inputs up 6.6% year over year, but bid prices are only up 3.6%. What does that spread mean? It means contractors are absorbing costs they cannot fully pass through. Inputs measure what it costs to build, while bid prices measure what the market will pay to have something built. When inputs outrun bid prices by 300 basis points, someone is carrying that difference. In construction, that difference lands in contractor margins. It does not stay there indefinitely. The compressed margin eventually shows up as fewer bidders, shorter bid list...

The April employment report landed this week. Here is what the construction numbers tell us. The headline number was 115,000 jobs added across the economy in April. What happened in construction specifically? Construction employment showed little change in April on a month-over-month basis. This is notable since April is historically one of the strongest months of the year for construction hiring. Seasonal patterns push workers back onto sites as weather improves and project activity accelerates. A flat reading in April is not neutral, it is a miss relative to what the calendar normally delivers. The year-over-year picture adds context. Construction employment in April 2026 is 50,000 higher than it was in April 2025. That sounds reasonable until you compare it to where that number has been. In April 2024, the year-over-year gain was 215,000. In April 2025, it was 101,000. Over the last ten years the average is 243,400 when you exclude the spikes in 2020 and 2021. In April 2026, it is 5...

The Bureau of Economic Analysis released its advance estimate of first quarter 2026 GDP this week The headline number, 2.0% annualized real growth, will dominate the financial press. It represents a meaningful rebound from the fourth quarter's 0.5% reading, and on its face signals an economy that is holding together under considerable pressure. For most readers, that is the story. For owners, developers, and preconstruction professionals in the nonresidential construction market, the story is in a different table entirely. What drove the Q1 GDP print? The BEA attributed Q1 growth to increases in investment, exports, consumer spending, and government spending. The investment category carries the most weight for construction audiences, but the composition matters. Gains in equipment, led by computers and peripheral equipment reflecting the ongoing AI infrastructure buildout, and intellectual property products drove the investment contribution. Private inventory investment also added ...