Volatile construction industry markers signal uncertainty for contractors nearing mid-year mark.

What We Learned in May: Construction Industry Gives Mixed Signals

Contractor confidence and backlog remain elevated and hiring has improved, but reemerging materials price escalation and stubbornly high borrowing costs darken the outlook.

Materials Prices Surge

Construction input prices surged again in April and are now up 7.0% year-over-year. To put the recent increase into context, input prices have risen more in the first four months of 2026 (6.2%) than they did over the prior three years (4.8%). Much of this increase is driven by higher oil prices, but tariff-affected materials like iron and steel are also experiencing persistent escalation. 

Nonresidential Construction Spending Continues to Slide

Nonresidential construction spending fell again in March as both the private and public segments contracted for the month. While the data center boom continues, manufacturing-related spending continues to fall as CHIPS Act-induced megaprojects wind down. With broader headwinds, like high borrowing and materials costs, weighing on activity in other segments, nonresidential spending will likely continue to fall in the coming months.

Construction Hiring Gains Momentum

Nonresidential construction employment rose at a healthy pace in April and is up a respectable 2.0% over the past year. While industrywide hiring remains subdued due to weakness in the residential segment, the ongoing demand for specialty trade contractors, specifically for data center work, should bolster demand for construction workers over the next several months.

Backlog and Confidence Suggest Underlying Momentum

ABC’s Construction Backlog Indicator surged to a 10-month high in April, but this momentum appears concentrated among the largest contractors. ABC members with greater than 0 million of annual revenue account for the entirety of the recent rise, with all other contractor size categories losing backlog over the past 12 months. Despite the diverging fortunes, ABC members remain broadly confident about the outlook; all three components of the Construction Confidence Index rose in April.

Looking Ahead

While the industry has shown some signs of momentum in recent months, particularly with regard to hiring, reemerging cost pressures darken the outlook. It is unclear when and to what extent the Strait of Hormuz will reopen, and high oil prices will continue to exacerbate input price escalation. Borrowing costs are also rising, and recent data suggest that rate hikes are now more likely than rate cuts over the remainder of the year.

SEE ALSO: ALL BUT SIX STATES HAD CONSTRUCTION UNEMPLOYMENT RATES BELOW 10% IN MARCH