Executive Summary
The global construction market is projected to experience another positive year of growth in 2026 if the current conflict in Europe can be resolved in the next 3 months. The Global Construction industry is projected to grow slightly in the range of 0.5% to 3.5%, not that great, but still moving in a positive direction. This growth will be propelled by Infrastructure projects, AI related data centers, Oil / Gas grassroots & add-on facilities. Institutional, Private Housing & Commercial type construction will (for the most part) decline slightly.
The Global Construction industry is set to embark on an amazing expansion in the next 15 years growing from $11 trillion today to a possible $20 trillion market, a 75% increase, assuming of course that no major conflicts or geopolitical event arises.
The global construction industry is starting to embrace AI, Digitalization, robotics and the use of drones. These systems are essential for staying efficient and profitable, unfortunately we are seeing some construction organizations reducing staff. This trend will continue in 2026 and beyond.
India, China, USA, Brazil, Saudi Arabia, Indonesia & Vietnam will be the leading countries that fuel this expansion.
It appears that the US will do much better than the (27) European Union countries. The new proposed reciprocal US trade tariffs will be problematic for many of the USA’s main trading partners.
Overall Global GDP growth is projected to increase by 2.6% to possibly 2.9% in the 1st Q 2026. Construction work has resumed on southern border barrier / wall between the USA & Mexico after a 4-year hiatus.
Construction related organizations in 2026 will need to attract and retain young construction professionals that are skilled in AI and invest / adopt digital and automation tools.
The US construction industry has a long-term problem, an aging workforce, that is retiring at the rate of 5,000 to 10,000 a week, this is not sustainable. Add to this the removal of undocumented Mexican & Central American workers sets the stage for a perfect storm, perhaps a year or two from now. In addition, construction professionals such as Estimators, QS’s, Planners etc. are also retiring and leaving the industry. Additionally, AI’s forecast uncertainties / layoffs – we could see a lot of problems down the road.
The Russia-Ukraine conflict has resulted in many countries looking to reduce their energy risks, we are seeing a numbers of recent announcements around the world related to new multi-billion $ (LNG) liquefied natural gas capital projects in the USA, Canada & a number of other countries. The demand for these projects & FPSO’s & FLNG’s is growing.
President Trump’s goal is to make the big Pharma companies produce their products in the US. This means that potentially billions of CAPEX $‘s will be spent on engineering & constructing new Pharma facilities in the USA, such as OSD, R&D, Fill & Finish, Packaging, Clean Rooms & GMP facilities over the next 3 to 5 years. China, India & some European countries such as Ireland, Sweden & Switzerland may have issues with this decision.
The impact of 50% tariffs on steel, aluminum & copper is expected to show up in the 1st Q of 2026 if tariffs are allowed to remain in place. There are still questions regarding the 15%, 25% & 50% tariffs with the US Supreme Court needing to approve or disapprove this Trump administrations order.
Both crude oil & gasoline prices have decreased by more than 7.5% in the last 3 months. Crude oil is trading below $60 a barrel, which could impact O&G CAPEX projects. The big question is: will oil prices stay below $60 or even drop to $50 a barrel levels? It appears that these low prices are impacting major oil company’s margins, as they continue to downsize & layoff staff. The wildcard in this ongoing situation, is what will happen with US’s embargo against Venezuela crude oil shipments. The US is threatening sanctions / additional tariffs on both China & India for their continuing purchasing of Russian oil, that the US claims these purchases are assisting Russia in its’ conflict with Ukraine.
The price of gold has soared to more than $4,500 an oz., with many investors move their savings to safe-haven assets.
The US Federal Reserve decided to lower interest rates to 3.5% at their December meeting. Look for another reduction or two in the coming months, with concerns related to low job growth numbers, perhaps related to AI utilization. This rate reduction should be a boost for home builders across all regions of the US.
Reduced gasoline & diesel prices have been good news for US consumers & the construction sector helping to tamp down prices for the last 12 months. The average price for a gallon of gasoline in the US has fallen below $3 a gallon down from $3.29 per gallon a year ago, a 10% decrease.
The US tariff situation seems to be in a state of flux / TBD, 80 + countries have contacted the Trump White House to negotiate better terms related to this problematic tariff issue.
President Trump’s objective is to protect domestic production & US companies & encourage demand for these products by removing / reducing current unfair trade practices. However, it will take possibly 6 to18 months for US construction materials producers to expand their current manufacturing capability / facilities to meet this new demand. Look for construction to increase by 2.5% to 3% in the next 6 months, if oil prices remain below $65 a barrel.
The best way for an EPC / General Contractor & Sub-Contractors to protect themselves in the coming year(s) is to include a “tariff” related increased cost clause in their future Contracts & Purchase Orders, that allows them to recover these increased costs from their client.
These new tariffs are resulting in foreign companies constructing new industrial projects for auto facilities, construction equipment, steel plants, data centers & micro-chip facilities valued at more than $500 billion. It appears that President Trump’s tariffs will not disrupt any ongoing & future capital construction projects, we see numerous data centers & industrial type facilities continuing to move forward all across the USA.
The 6 Risks / Challenges the Global Construction Industry Will Face in 1st Q 2026 & Beyond
- The continuation of the Russia vs. Ukraine war
- China’s future trade and territorial aspirations
- Geopolitical pressures and future regional wars such as USA & Venezuela
- High construction material costs and US tariffs. Construction material costs have increased by close to 20% in the last 30 months.
- Acute shortages of skilled labor both in North America, Europe and Australia / New Zealand
- Persistent inflation and high interest rates continue to be a problem in some countries, particularly related commercial / residential type construction work
Hopefully, some of these issues will be resolved in the near future and beyond.
Key Global Construction Growth Sectors in 2026
- AI Data centers located in USA, Europe & Asia, spending on these facilities is forecast to double last year’s spend.
- Semiconductor / microchip facilities, look for expenditures to increase by 5% to 8% from 2025.
- Pharma & Hi Tech & Manufacturing, CAPEX to climb by 4% to 6% from 2025 levels.
- Infrastructure work funded by Governments such as highways, bridges, heavy marine / tunnel civil type work and rail, is set to increase by 5% to 9% from 2025 levels.
- Power / Pipeline projects, with nuclear power now back in the mix. CAPEX to climb by 4% to 7% from 2025 levels.
- 2026 should see a gradual lowering of borrowing / interest rates, which could spur construction growth in the US.
Artificial Intelligence (AI) will continue to advance across all areas of the construction industry. The jury is still out on which “people” related jobs will be lost to computer generated (AI) activities. Prominent software development industry leaders predict that (AI) will replace millions of “white collar” workers in the next 5 to 10 years. However, blue-collar workers like Carpenters, Electricians, Plumbers & others may not be impacted by AI. AI is set to revolutionize how Industrial, Infrastructure & Buildings capital projects are Planned, Estimated, Managed, Procured & Executed, bringing increased efficiency through automation & enhanced analysis.
Current Size of Global / Regional Construction Markets
| # | Region | End of Year 2025 Value in Trillions $‘s |
|---|---|---|
| 1 | North America (USA / Canada / Mexico) | $3.10 |
| 2 | South America | $0.95 |
| 3 | Western Europe | $2.43 |
| 4 | Eastern Europe | $0.80 |
| 5 | Middle East / Africa | $1.31 |
| 6 | Asia / Australia (China / India / Japan / Australia / New Zealand / Other S.E. Countries) | $3.07 |
| Total | $11.66 |
The countries that will experience some of the highest GDP growth in the 2nd half of 2025 include: Guyana, Ethiopia, Niger, Senegal, Libya, UAE, Cote d’Ivoire, Philippines, India & Vietnam.
Note: the vast majority of these countries are large exporters of Oil / Gas, Minerals & Timber products.
1st Q of 2026 Construction Outlook for the 12 Major Countries
| Rank | Country | 2026 GDP ($T) | GDP Growth % | Construction % of GDP | Inflation & Unemployment | Key Comments |
|---|---|---|---|---|---|---|
| 1 | USA | $31.3 | 2.7% | 9% – 11% | 2.8% & 3.9% | The future outlook for the US construction sector in the next 2 or 3 quarters appears promising, there are a couple of headwinds such as shortages of skilled workers, the impact of US tariffs & ongoing regional conflicts in Europe & the Middle East. The US GDP is forecast to increase by 2.7% in 2026, which is reasonable compared with other G7 economies. The US construction has a long-term problem, an aging workforce, that is retiring at the rate of 5,000 to 10,000 a week, is not sustainable. Add to this the removal of undocumented Mexican & Central American workers sets the stage for a perfect storm, perhaps a year or two from now. In addition, construction professionals such as Estimators, QS’s, Planners etc. are also leaving the industry, add AI into the mix & we could see a lot of problems down the road. The AI expansion is here, just how big will AI be? The data / call center construction sector is experiencing substantial growth fueled by AI and advanced micro-chip production and technology companies. The US Government has announced that a 100% tariff will be imposed on all on imported drugs / pharmaceutical products from October 1st, 2025, this is good news for the US construction industry, that will create lots of opportunities. |
| 2 | China | $19.9 | 4.1% | 11% – 15% | 0.7% & 5.7% | Latest indications are emerging that China’s economy & construction sector are experiencing a serious slowdown. The Chinese Government contributed to this problem by providing low-cost loans that sparked an oversupply of new homes & office facilities. Construction expenditures are expected to remain subdued for the next 12 months. Relations with its neighbors & USA are very strained. The halcyon days of 6% & 7% GDP growth appear to be gone. |
| 3 | India | $5.9 | 7.1% | 12% – 16% | 3.5% & 6.8% | The Indian Government is pumping billion of Rupees into Infrastructure / Hi-Speed Rail and Power related projects, look for this to continue in 2026 and beyond. The Indian economy is one of the fastest growing out of the world’s major countries. Assisted by government initiatives / investment programs, major Fortune 500 consumer goods investments. India’s construction industry is forecast to experience dynamic growth in the next 12 months. India has overtaken China in as the world’s most populated country in 2025, with a population of 1.45 billion. The military standoff between India and China in the northern Himalayan region is tenuous and threatening, with troops positioned in close proximity to each other, both countries are claiming sovereignty of the disputed border area. India and China are serious rivals, this border issue could turn out to be a “ticking timebomb” now and in the future. |
| 4 | Germany | $4.8 | 0.3% | 9% – 11% | 2.6% & 3.9% | Not much to write home about regarding 2026 construction activity. The German economy has struggled for the last 5 + years (perhaps the lengthiest decline since the East / West 1990’s one Germany reunification). The war in Ukraine, emigration issues & a general malaise has gripped Germany. |
| 5 | Japan | $4.3 | 1.6% | 9% – 11% | 2.9% & 2.6% | Still slow going in Japan, similar to the last 7 – 8 years, Japan construction sector similar to the overall economy is basically underperforming. Japan has an aging population problem, and how is financed, more taxes? |
| 6 | UK | $3.8 | 1.4% | 9% – 11% | 3.7% & 4.8% | Construction activity in the UK, is seeing a minor improvement in Office / Admin type construction, together with some roadworks, rail upgrades, power (nuclear type facilities), docks / jetty refurbishments & warehouse / logistics facilities. The London area remains the bright spot for UK construction activity. Immigration is a hot potato in the UK; Ukraine & dealing with President Trump are some of the challenges for the UK. |
| 7 | France | $3.4 | 0.8% | 9% – 11% | 1.9% & 6.2% | Latest feedback from France is that the Construction Industry should see a small uptick in construction activity as we move into 2026. The French construction sector continues to be in the somewhat in the doldrums. Still slow going in France, similar to the last 7 + years Immigration is a big issue; Ukraine vs. Russia & dealing with President Trump are some of the issues to deal with in 2026. |
| 8 | Italy | $2.5 | 0.6% | 9% – 12% | 1.8% & 6.1% | New Prime Minister / leadership could stir the pot & improve the economy & construction sector. The Italian construction industry is experiencing a modest uptick in construction activity, still a long way to go to recapture its status / standing it had a decade back. The big news is the approval of 2.2 miles Strait of Messina Suspension Bridge, a $15 + billion connecting the island of Sicily to the Italian mainland. |
| 9 | Brazil | $2.5 | 3.3% | 9% – 12% | 5.3% & 6.1% | The country exports three times more to China than to the US, insulating it from potential tariff threats under a returning Donald Trump. Brazil’s construction market is forecast to grow by 3.2% to 3.7% in the 1st Q of 2026. |
| 10 | Canada | $2.3 | 1.8% | 9% – 11% | 1.8% & 7.1% | Canada’s construction market is projected to grow to C$285 billion by the end of 2026. Canada’s construction activity in the 1st Q of 2026 is forecast to expand marginally by 1.6% to 1.9% over 2025 levels. Canada is a significant exporter of construction products to the USA; future tariffs & trade disputes could stymie future construction / economic growth in 2026 / 2027, dealing with President Trump is a major issue for the new Prime Minister, still trying to figure out President Trump, friend or foe? |
| 11 | Russia | $2.2 | 1.3% | 11% – 14% | 8.7% & 2.7% | Russia’s 2026 construction is set to experience a significant slowdown after a somewhat of a reasonable 2025. There could be serious complications if any NATO member country shoots down any Russian flighters that enter their airspace. Stay tuned. |
| 12 | Mexico | $2.3 | 1.6% | 10% – 13% | 3.7% & 2.8% | Mexico is a major supplier of construction material to the US. Possible US tariffs, drug cartels, border issues & dealing with President Trump are the 2026 challenges facing Mexican economy & construction sector. Mexico’s construction sector is forecast to experience positive growth in 2026, driven by infrastructure and a number of petro-chemical capital projects. |
Q1 2026 Prices at a Glance
- Forecast Cost of a barrel of Crude Oil: $60 – $70
- Forecast of Euro / US $ Exchange Rate: 0.83 – 0.88
- Forecast of UK Pound / US $ Exchange Rate: $1.34 – $1.37
- Forecast of Structural Steel per pound: $1.30 – $1.40
- Forecast of Copper per pound: $4.30 – $4.50
- Forecast of Gold per Ounce: $4,400 – $4,800
- Forecast of Aluminum: $1.20 – $1.40 / pound
- Forecast of 3/4” 4’ x 8’ CDX PT sheet of plywood: $51.25 – $55.00
- US Construction Material Inflation (Basket of 10 construction materials): 2.4% – 2.8% – Average 2.6%
Tariffs, Trade Policy & Contractor Protection
The best way for an EPC / General Contractor & Sub-Contractors to protect themselves in the coming year(s) is to include a “tariff” related increased cost clause in their future Contracts & Purchase Orders, that allows them to recover these increased costs from their client.
These new tariffs are resulting in foreign companies constructing new industrial projects for auto facilities, construction equipment, steel plants, data centers & micro-chip facilities valued at more than $500 billion. It appears that President Trump’s tariffs will not disrupt any ongoing & future capital construction projects, we see numerous data centers & industrial type facilities continuing to move forward all across the USA.
The impact of 50% tariffs on steel, aluminum & copper is expected to show up in the 1st Q of 2026 if tariffs are allowed to remain in place. There are still questions regarding the 15%, 25% & 50% tariffs with the US Supreme Court needing to approve or disapprove this Trump administrations order.
Federal Reserve, Energy & Tariff Negotiations
The US Federal Reserve decided to lower interest rates to 3.5% at their December meeting. Look for another reduction or two in the coming months, with concerns related to low job growth numbers, perhaps related to AI utilization. This rate reduction should be a boost for home builders across all regions of the US.
Reduced gasoline & diesel prices have been good news for US consumers & the construction sector helping to tamp down prices for the last 12 months. The average price for a gallon of gasoline in the US has fallen below $3 a gallon down from $3.29 per gallon a year ago, a 10% decrease.
The US tariff situation seems to be in a state of flux / TBD, 80 + countries have contacted the Trump White House to negotiate better terms related to this problematic tariff issue.
President Trump’s objective is to protect domestic production & US companies & encourage demand for these products by removing / reducing current unfair trade practices. However, it will take possibly 6 to 18 months for US construction materials producers to expand their current manufacturing capability / facilities to meet this new demand. Look for construction to increase by 2.5% to 3% in the next 6 months, if oil prices remain below $65 a barrel.