Construction Industry Trends (November 2024)

Our monthly construction industry trend report combines the latest industry data with our internal findings from National Business Capital’s award-winning team. With extensive experience in the construction industry since 2007, we are thrilled to share these findings and expand on them through our unique expertise.

Our goal is to provide business leaders and decision-makers with the necessary information and data to make well-informed decisions in their business endeavors. This month, we’ll set our sights on 2025 and discuss the impact of proposed legislation on the construction industry.

Preparing for the Impact of Proposed Tariffs on Raw Materials

Last month, President-elect Donald Trump won the presidential election, paving the way for his second term in office. Although his victory instilled confidence in the market, many companies are bracing themselves for the impact of his proposed tariff plan on their bottom line.

Lumbar Prices (2014 – 2024)

Source: Fred St.Louis

November 2024 – For home builders, the proposed tariffs would further increase the already inflated price of soft lumber. Outside of raw materials, the plan would also increase the cost of other home-related items, like air conditioners, garage doors, dumpsters, etc. Construction companies in subsections other than home building may also have to handle these higher costs, along with potentially higher costs on steel and aluminum.

The graph above shows the producer price index (PPI) trend of all construction materials from 2014 to 2024. As you can see, the last two years have followed a slightly downward trend in material prices – a welcome change for construction companies. However, the proposed tariff plan of our new president could reverse this trend by increasing import costs.

Diesel Prices (2014 – 2024)

Source: Fred St.Louis

November 2024 – Another key price to monitor is fuel. According to Statista, the U.S. imported $164.9 billion in fuel YTD in 2024. Hypothetically, under a 20% tariff, that same amount of oil would cost $197.8 billion.

Since diesel fuel is such a vital component of the industry’s workload, this trend is important to monitor. Higher overhead – and sudden changes in overhead – can limit profitability, especially in larger jobs. Construction companies in the pricing stage of their projects need to consider how potential increases in fuel costs will impact their profit margins. For those with ongoing jobs, speaking with your accounting team will be a must.

How Are Companies Responding?

Seeing change on the horizon, many construction companies have proactively purchased the materials they’ll need in 2025. Many companies that have done so through National Business Capital have immediate material needs in the new year, and their efforts are to keep costs lower as they find a new supplier relationship.

However, this strategy has its limitations. Material suppliers receiving a higher volume of orders may raise their prices, which can erode the savings of proactive ordering. Bulk orders may help protect against higher prices on a vendor-by-vendor basis.

Another challenge with proactively ordering materials surrounds the ability to quickly access capital. Companies with senior credit facilities that don’t support a larger material order may request an overadvance from their lender. However, as more companies follow suit, a lender’s ability to offer an overadvance becomes more difficult.

Francois Bouville, National Business Capital’s Director of Institutional Partnerships, wrote an article on this topic, explaining how National Business Capital’s subordinated debt is a key resource for these companies. Read the full article on LinkedIn here.

One thing to note is that there’s ambiguity as to the speed of how our government will implement these tariffs and which countries the more significant tariffs will affect. For instance, a HousingWire article discusses how Trump vowed a 20% tariff against Mexico unless there’s progress in the border challenge. It’s unclear whether this will become a reality, nor are we sure if implementing these new tariffs will scale over time or go into full effect immediately. Still, it’s important for construction companies to monitor nonetheless.

Companies beginning new jobs will have an opportunity to adjust pricing models to accommodate their material costs. However, those in the midst of projects may need to take different actions, whether by accessing capital to cover their higher material costs or speaking with decision-makers to adjust contract pricing. This is especially true for construction companies specializing in government work.

Other Relevant Trends & News

• Non-Fatal Injury Rate for Construction Workers Drops to Lowest in 10 Years – A Construction Dive article explains that the nonfatal injury rate has steadily fallen since 2011 to its lowest point in over a decade across private and public industries. This is good news, not just on a humanitarian level but also considering the high cost of insurance for employers.
• Residential Construction Spending Contracts 7.3% YTD – Residential construction spending fell by $17.7B, a 7.3% dip YoY, as reported by ConstructConnect. Most of the dampened spending results from a more severe downturn in multifamily housing starts, which have decreased by 24% YTD.
• Interest Rate Cut Positively Affects Construction Project Abandonment and Delays – The Federal Reserve’s recent 25 basis point interest rate cut undoubtedly boosted confidence in the industry, but it’s had a more tangible impact on the private sector, specifically. Projects placed on hold dropped 56%, while private project abandonments fell by 21.7%, according to an article published on Construction Dive.
• Electrical Infrastructure Bottleneck May Slow Data Center Progress – As more and more data centers reach the final stages of construction, connecting these facilities to the power grid becomes a much greater challenge. According to ForeignPolicy.com’s article, the electrical draw from these data centers greatly exceeds the standard, and many infrastructure engineers refuse to connect them to the grid because of the danger of an outage. The sentiment could slow the construction of new data centers in favor of electrical infrastructure projects in the near to mid-future.
• Manufacturing Construction, Office Construction, and Lodging and Commercial Developments Drive Private Sector Spending – An article on Construction Today discusses the biggest drivers of private and public construction spending. In the public sector, highway and street construction, public safety, waste disposal, and water supply drive the most spending.

National Business Capital’s Construction Recap (November 2024)

Each month, we’ll offer our unique viewpoint on the construction industry’s short to mid-term outlook. Our insights come from a combination of available industry statistics, internal data, and the general sentiment of the construction clients we work with daily.

• 83% Increase in Manufacturing Funding Volume – The variety of initiatives in the manufacturing sector has created a need for capital. Their need can be seen through National Business Capital’s funding data, where manufacturing funding volume increased by 83% since October. Many are using our capital for material orders ahead of impending tariff changes, while others are investing in equipment to operate more efficiently. It’s encouraging to see the industry taking action, and we’re eager to see what the future holds.
• Increase in Roofing Contractors (40%) After Inclement Weather in the South – Roofing contractors have handled a higher workload since Hurricane Helene and Milton changed the lives of so many on the East Coast. Their assistance in the recovery efforts has created a need for operational capital, and our team has worked closely with them to provide it. Overall, we’ve seen a 40% increase in roofing contractor clients while expecting more in the short-term future.