ECONOMIC OVERVIEW
Growth fades as inflation re-emerges
Growth averaged near 1.8% across the first half of the year, 2.1% in Q1 and 1.5% in Q2. That is enough to keep funded work moving but not enough to bring new projects forward. Forecasters expect more of the same, with the July American Institute of Architects forecast putting nonresidential building spending up about 1% this year and the weakness carrying into 2027.
The Effective Funds Rate has reported 3.63 to 3.64 every month since January, and renewed inflation has pushed the next cut past what markets expected in January. Financing costs have stopped rising but show no near-term path lower. Privately financed work is the part of the market that waits on rates; publicly funded and balance-sheet-funded programs do not.
Headline unemployment eased to 4.1% in July, but consumer confidence at 90.8 is still weak by historical standards. Weak household demand is why the consumer-facing side of the private market has been the slowest to commit.
Headline CPI ran 2.4% in January, peaked at 4.2% in May and eased to 3.4% by July, almost entirely on energy. August fuel prices point to another wave of cost increases. Freight, materials and construction services reprice after the spot move, so input costs keep climbing into the second half while inflation above 3% keeps the Federal Reserve on hold.
Source: Bureau of Economic Analysis
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Figure 2:
Key economic indicators - movement (%) or index value where stated
Latest period
Previous period
Real GDP (QoQ %)
0.4
2026 Q2–2026 Q1
0.5
2026 Q1–2025 Q4
Real GDP (QoY %)
2.1
2026 Q2–2025 Q2
2.7
2026 Q1–2025 Q1
Annualized GDP (QoQ %)
1.5
2026 Q2–2026 Q1
2.1
2026 Q1–2025 Q4
Inflation - Consumer Price Index (CPI) - (MoY %)
3.4
July 2026
3.5
June 2026
Unemployment rate (%)
4.1
July 2026
4.2
June 2026
CB Consumer Confidence Index
90.8
July 2026
92.2
June 2026
Federal Funds Effective Rate (%)
3.63
July 2026
3.63
June 2026
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