US April CPI was announced today at 2.3%, a modest improvement following March’s 2.4% figure. Shelter costs drove much of this increase, rising by 0.3%, while increases in natural gas and electricity offset declines in gasoline prices.
The latest release follows last weeks’ US Federal Reserve’s decision to maintain the Federal Funds Rate at 4.25% to 4.5%.
Earlier in April, Fed Chair Jerome Powell delivered an updated economic outlook for the US, with an emphasis on their dual mandate (maximizing employment and price stability) as well as maintaining their optimism on the resilience of the US economy. Labor market indicators such as job and wage growth showed strength. Inflation, while higher than the 2% target, appears to be under control.
Despite this, GDP in the first quarter contracted, and consumer and business confidence has fallen dramatically amid the uncertainty caused by the Trump Administration’s trade policies. While a recent 90-day reduction in tariffs with China has caused markets to rally in the short-term, continued de-escalation is crucial to restore long-term market confidence.
Although tariffs typically cause temporary spikes in inflation, the US Fed officials recognize that the magnitude of tariff related impact was larger than anticipated, and the inflationary effects may be more persistent. They continue to collect data to evaluate the impact of tariffs to longer-term inflation as well as the overall balance of risks to the US economy when deliberating monetary policy.
Underlying Macroeconomic Trends
Advance figures for Q1 2025 GDP are at -0.3%, far below Q4 2024’s 2.4%. Core PCE rose 2.8% as well – maintaining the outlook that inflation has been stubborn. While payroll employment (+177,000) and the unemployment (4.2%) metrics continue to be strong, they fell behind the gains seen in the previous year.
The first four months of 2025 have seen some turmoil; many anticipate growth to slow overall as a result of tariffs imposed by the US. The International Monetary Fund (IMF) revised their initial US growth outlook for 2025 from 2.7% in January down to 1.8% in April. Trade contentions with China have essentially embargoed goods transfer between the two countries – Port Optimizer, a tracking system for cargo ships, is reporting a 44% year-over-year decline in freight traffic between May 4 and May 10. Many businesses ramped up imports prior to tariffs coming into effect – the US trade deficit reached a record high in January, but warehouse stores may only last a few months.
Goods exchanged between the US and its allies support hundreds of thousands of jobs, from port workers to truck drivers, and warehouse workers. As container traffic slows into US ports, many jobs are under threat and layoffs in many associated industries have begun. For example, Cleveland-Cliffs, a US steel manufacturer based in Ohio, laid off more than 1,200 workers in March.
Looking at the US Construction Industry
Across the US, housing starts fell -11.4% in March (1,324,000) compared to February (1,491,000) and construction spending fell by -$10.8 billion (-0.5%). Preliminary construction employment trends are positive, with a projected 8.3 million employed in March and April 2025. Job openings for construction are growing (288,000 in Feb), and construction unemployment fell from 6.5% in January to 5.6% in April.
The construction sector continues to be a key factor in driving economic growth domestically, but tariffs have caused prices of many imports, such as lumber, steel, and aluminum, to spike. As tariff costs are paid by the importer and often passed down to the consumer, costs for construction projects will likely see significant jumps as existing inventory for materials is used up.
During these uncertain times, establishing mechanisms to identify, understand, and control cost and risk on construction projects is critical. BTY’s construction professionals have been supporting our clients across the US on major residential, transportation, commercial, and entertainment sector projects for decades. Connect with a member of our team to find out how we can help on your next project.
