The US construction industry is slowing down, with high interest rates acting as a barrier to growth. Many speculate that September 2024 could see the first interest rate cut in four years, however, offering hope of improved market conditions.

Such a decrease is unlikely to significantly boost construction activity in the short-term, though, or instantly increase credit availability and cash flows. While stock markets can shift within minutes, it takes time for investors to change tack and contractor balance sheets to improve. The positive impact of interest rate reductions on construction activity may be lagged by at least a year.

The immediate health of the US construction sector is mostly predetermined. The AIA/Deltek Architectural Billings Index (ABI), one of the more prominent barometers of industry performance, has now declined for 17 consecutive months as of June 2024. Dodge Construction Network’s (DCN) total construction starts metric also fell by 18.6 percent on the month in June following several reductions in 2024.

These metrics imply that construction activity could soften this year and fade further in 2025. AIA’s consensus panel is aligned to that view, suggesting that non-residential construction spending could register growth of 2.0 percent in 2025, 5.4 percentage points lower than 2024 estimates.