As 2026 draws to a close, the construction industry faces a widening divide: overall spending is declining, while investment in AI infrastructure, data centers and power continues to grow. That expansion is creating opportunities for precast producers, but it is also intensifying pressure on material costs and skilled labor. FMI’s fourth-quarter outlook highlights how these competing forces are shaping the year—and the conditions ahead in 2027.
FMI’s fourth-quarter Engineering and Construction Outlook lowered the 2026 construction forecast to $2.167 trillion, down 3.4% from 2025, a roughly $77 billion drop, and steeper than the 1.3% decline in our third-quarter edition. Four of 19 segments are growing, 5 are stable, and 10 are declining. The industry is running at two speeds in our forecast. Digital and AI infrastructure, the data center, power, water, and sewage segments, is up 11% this year, while traditional construction, the rest of the industry, falls 6%.
Overall producer prices rose 6.3% in September from a year earlier, the largest 12-month increase since December 2022. Energy, up 20.4% over the past year, drove more than 80% of the month’s rise in goods prices, per BLS. The materials and services contractors buy climbed 11% from a year ago in the same release. July’s Section 301 tariffs also add to the price of imported materials. In total, FMI expects construction cost inflation of 5% to 7% or higher for the year.
Though there are ties to energy, the AI buildout has become its own source of cost pressure, both inside construction and in the broader inflation numbers. In July the Census data center line reached a $75 billion annual pace, 57% higher than a year earlier. Our forecast carries data center construction from ~$74 billion this year to $102 billion in 2027, while power spending reaches $273 billion by 2030. In our internal megaprojects research, power megaprojects accelerate from a 2.9% annual pace over 2020 to 2025 to more than 30% per year through 2030.
The same research puts projects of more than $1 billion at 9% of nonresidential spending over the past decade and nearly 29% of work in planning, and that concentration is repricing inputs across the industry. September’s producer price data show switchgear up 12.4% from a year ago, transformers up 7.6%, and copper products up 30%.
Construction wages are rising 4.2%, ahead of the 3.0% pace for all private workers, and these projects hire from the same electrical and mechanical trades every other segment needs.
For precast producers, data center and power campuses carry heavy below-grade electrical scope, and duct banks, vaults, trenches and equipment structures are standard precast products. The spending driving this year’s cost inflation is funded with the cloud companies’ own cash, underway and less sensitive to interest rates, and pricing for 2027 should assume the current range holds.
Source: FMI Q4 2026 North American Engineering and Construction Outlook and FMI analysis of Census construction spending and BLS price and employment data, as of October 21, 2026. Read the full forecast at fmicorp.com/insights/construction-outlook, and track FMI’s quarterly indices at fmicorp.com/insights/indices.
Brian Strawberry, a chief economist in the construction industry, leads FMI’s efforts in market sizing, forecasting, building products and construction material pricing, and consumption trends. He focuses on primary research methods, including the implementation and analysis of surveys and interviews. Brian also leads and manages various external market research engagements and constructs tools and models for efficiently performing high-quality analyses.