Inflation is cooling and interest rates are expected to begin falling in the second half of the year, but other issues persist, Anirban Basu, chief economist for the Associated Builders and Contractors, said in a July 10 midyear economic update webinar presentation. 

“A lot of people thought recession was inevitable last year. It didn’t happen,” said Basu. “[But] I still believe there’s a chance for a very mild recession in 2025.” Basu points to rising consumer debt and the uncertainty of the upcoming election among the challenges the economy is currently facing.

Total non-residential construction spending rose 37%, not adjusted for inflation, during the period between the start of the COVID-19 pandemic in February 2020 and May 2024, according to the U.S. Census Bureau. “This is still the era of the megaproject,” said Basu, in response to the staggering 198.1% increase in the manufacturing sector. The hotel sector continues to sit at the bottom of the list, falling at a rate of 30.5%.

Nearly half of webinar participants reported in a survey that the labor shortage is the most pressing issue within their firms at the moment. In a later poll, 29% indicated they expect their companies’ profit margin to be slightly lower a year from now.

Basu predicts that interest rates will begin to decline in September, with an additional rate cut by the Federal Reserve in December likely. Still, he notes, the cuts won’t have an immediate effect on the economy “because of signed contracts or executed current work” and there will be a lag before the positive effects are felt.

While many economists have abandoned the idea of a recession in the near term, Basu continues to expect one. “It will come nearly a year after I initially anticipated, but recession is coming.”