Construction insurance specialists cite a number of factors in describing the 2025 construction industry as a market in transition. There is uncertainty about the year’s economic outlook, potential impacts of tariffs on the supply chain for materials, project delays, and the ongoing and perhaps worsening issue of labor shortage. All of these forces are pressuring contractors of all sizes.
The effects are seen in the data. “Broad-based monthly declines in construction starts represent a troubling signal for the sector,” said Eric Gaus, chief economist at Dodge Construction Network. According to Dodge, total construction starts were down 9% in April to a seasonally adjusted annual rate of $1.03 trillion. Nonresidential building starts declined 3%, residential starts fell 4%, and nonbuilding (highway, bridge, utility/gas, and other public works) starts decreased 22%. On a year-to-date basis through April, Dodge reported total construction starts were down 3% from last year.
The Associated General Contractors of America reported that construction spending fell for the third month in a row in April, declining 0.4% from March and 0.5% from a year earlier–the first year-over-year decrease since April 2019. “Ever-changing announcements about tariffs on key construction inputs, along with potential retaliatory measures by U.S. trading partners, are making owners hesitant to commit to new projects,” said Ken Simonson, chief economist of AGC, in early June.
The rollercoaster environment surrounding U.S. trade policy and the economy’s short-term outlook in general have been the main drivers of uncertainty for construction industry outlook in the first half of 2025 and, likely, going forward as well.
“Unless contractors and investors have greater certainty about what costs and demand to expect, private construction is likely to continue declining,” said Jeffrey D. Shoaf, AGC’s CEO. “That will make the U.S. less competitive and damage the prospects for economic growth.”
While the data may not be encouraging, construction insurance specialists remain relatively positive. While they do have concerns about project delays, the good news is most delays have not yet turned into project cancellations.
Unless the delays turn into years and not months, the insurance industry will likely not feel the bump, said Kirk Chamberlain, executive vice president, leader of Hub International’s construction practice. “Delays in the process bum out the brokers a bit as they’re trying to place insurance and make money, but we haven’t seen a ton of delays turn into cancellations, which is good news for us,” said Chamberlain.
Darren Tasker, regional head of construction in the Americas for Allianz Commercial, added that while there is more uncertainty in the construction world now than in 2024, building has not stopped. “Still a ton of projects in the pipeline. Contractors still have a massive back order of contracts,” he said.
