KEY POINTS
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The National Association for Business Economics released their June 2026 Outlook Survey, which showed increased inflation expectations.
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Higher inflation could delay any interest rate cuts from the Federal Reserve, which is expected by respondents.
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Persistent inflation and delayed rate relief could be a cause for concern for the construction industry.
The National Association for Business Economics (NABE) recently released their June 2026 Outlook Survey results, with the inflation expectations standing out. Respondents significantly hiked their inflation expectations, with the current conflict in the Middle East being cited as a main risk to push inflation even higher.
The rising expectations are relevant to the construction industry. Higher inflation not only means higher jobsite and material costs, but it could also sideline interest rate relief.
The higher inflation expectations could cause the Federal Reserve to hold rates steady, as the majority of survey respondents expect them to do through 2026.
Rising Inflation Expectations
The NABE’s June Outlook Survey returned median expectations for personal consumption expenditures (PCE) inflation at 3.6%, up significantly from 2.7% in March.
Increased energy prices were noted as a driver of the increase in expectations, with some respondents noting that impacts will scale larger the longer trade traffic remains subdued.
The uptick in PCE inflation expectations is significant as the measure is the Federal Open Market Committee’s preferred inflation figure.
Rate Cut Delay Anticipated
The Federal Reserve cuts rates to stimulate a slowing economy, but when inflation is already running hot, cheaper borrowing could accelerate spending and push prices even higher. This means that the current environment could push the Fed to hold off on cutting rates.
For construction, interest rates on project loans and development financing remain elevated as long as the Fed holds steady.
The NABE panel expects no rate cuts before the second quarter of 2027, and a growing share of panelists believe that interest rates, even after cuts begin, will settle at a higher level than previously expected.
What it Means for Construction
The June NABE Outlook Survey points to an inflation environment that is running hotter than forecasters expected just a few months ago, with energy prices and geopolitical uncertainty adding upside risk to an already elevated baseline.
That shift in expectations has pushed rate cut timing further out, and raised the likelihood that borrowing costs, even once relief arrives, will not settle as low as many had anticipated.
For construction firms and developers, project financing costs are unlikely to ease meaningfully in the near term, meaning planning built around lower rates may need to be revisited.
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