Construction Financial Professionals Remain Confident Amid Uncertainty
March 2025
Often, the first quarter is associated with a rebound in confidence among financial professionals connected to the U.S. construction industry. That did not happen during 2025’s initial quarter.
While the Overall Confindex reading has expanded during 11 of the past 15 first quarters on record, the index declined 2.6% during the first quarter of 2025 to 113. Nonetheless, the overall index is up 3.7% on a year-ago basis and remains reasonably elevated by historical standards.
Many CFOs, comptrollers, and others have become increasingly concerned by prospects for rising materials prices. Given all the talk about tariffs emanating from Washington, D.C., that comes as no surprise.
The share of respondents that indicate that prices are worse increased from 32% during 2024’s final quarter to 38% during the first quarter of 2025. More than half of respondents (51%) expect prices to be more problematic a year from now, up from 37% during the prior quarter. Only 12% expect construction input prices to be more favorable in a year. Relatedly, the share of respondents expressing concern regarding the influence of public policy on construction activity edged higher during the quarter.
Accordingly, the Business Conditions Index slipped 3.4% during the first quarter to a reading of 113. That reading is also approximately 4% higher than a year ago. These figures indicate a still active market, but the directionality indicates growing concern.
While prospective tariffs have been garnering many of the headlines, there is still the lingering issue of inflation. Recent inflation data have come in hot, with the Federal Reserve’s goal of reestablishing a 2% rate of inflation becoming increasingly elusive. Accordingly, interest rates are poised to remain higher for longer. There was a time last year that the bond market was factoring in approximately six rate cuts in 2025. Now conventional wisdom holds that there may be one or two rate cuts in 2025, with many economists anticipating no rate reductions at all this year.
Perhaps because expectations regarding the cost of capital have changed, the Financial Conditions Index slipped 2% during the first quarter to a reading of 113. The reading is still approximately 4% higher than a year ago, with anecdotal evidence suggesting that banks are willing to lend, but that borrowing costs remain elevated.
One seismic shift in the survey data relates to human capital shortfalls. For years, the number one challenge facing contractors has been securing enough sufficiently skilled workers to fulfill contractual obligations. But with higher interest rates helping to postpone a substantial number of projects, including in the multifamily segment, the share of respondents that expressed an elevated level of concern regarding skills shortages declined to 60% from 68% during the first quarter. The level of concern is now at its lowest level since 2021.
The upshot is that while materials prices may become more challenging during the months ahead, worker compensation costs are poised to expand less rapidly going forward. The direction of contractor profit margins is therefore ambiguous. That ambiguity is neatly reflected in survey outcomes.
Respondents are deeply split regarding profitability. Almost equal shares indicate that profit margins are better (34%), worse (34%), and the same (32%) as a year ago. With respect to the year to come, 39% expect their margins to be unaltered, 31% expect them to be better, while 29% expect them to be worse. In short, industry profitability is poised to be roughly flat over the next year.
Somehow, It Will Work Out
The offsetting influences are neatly reflected in the Year Ahead Outlook Index, which was unchanged at a reading of 122 during 2025’s initial quarter. Facially, this appears to be an unremarkable result, but it is far from that.
Given all the uncertainty regarding tariffs, tax cuts, monetary policy, geopolitics, federal budgets, and the national debt, one might expect construction financial professionals to embrace a less upbeat, more cautious outlook. For now, the average respondent expects that things will work out just fine.
About CFMA’s CONFINDEX
The CONFINDEX is CFMA’s proprietary confidence index survey that measures the confidence level of leading financial professionals in the U.S. commercial construction sector. CONFINDEX is compiled from four sub-indices measuring critical components of the financial health of a commercial construction company: Business Conditions, Financial Conditions, Current Conditions, and Year-Ahead Outlook. A reading of less than 100 indicates pessimism among the survey participants, while a reading of more than 100 indicates optimism among survey participants.