Recent economic data reflected a modest economic weakening of conditions in the context of elevated inflation, according to Construction Materials Economist Ed Sullivan. Consumer spending increased – but at a rate less than expected. As a result, inventories rose – sending a signal that future production may come in light. GDP for the fourth quarter was revised down from 0.7% to 0.5%. Finally, consumer sentiment hit record lows.
“All this remains within the boundaries of our pre-Iran conflict scenario that expected a first-half economic softening, followed by a stronger second half of 2026,” he said. “The key determinant, the economic outlook, does not lie in the typically reported monthly economic data. It comes down to one factor – how long shipping traffic through the Strait of Hormuz is hindered.”
The longer it takes, the more adverse consequences to the economy. Oil prices will run higher, supply chains will be stressed, and higher inflation will follow. Higher inflation will be embedded in interest rates – to the detriment of construction activity.