Allen-Villere Partners Market Analysis

Construction Materials

  • Following three rate cuts in the latter half of 2025, the Federal Reserve has maintained its Federal Funds target range at 3.50% – 3.75%. With inflation showing renewed signs of acceleration, market participants have meaningfully scaled back expectations for near-term easing, with consensus now pointing to a prolonged hold.
  • Inflationary pressures re-accelerated in May, with the Consumer Price Index climbing 4.2% year-over-year. The resurgence reflects a combination of tariff-driven goods price increases, the Iranian war, and broader supply chain adjustments stemming from recent U.S. trade policy actions.
  • Looking ahead, several macroeconomic forces warrant close attention. Housing market dynamics remain a critical demand driver, as elevated mortgage rates continue to weigh on residential starts and private construction activity. Additionally, geopolitical instability in the Middle East and its effect on energy and fuel costs remains a variable with direct margin implications for materials producers and contractors alike.
  • Consumer sentiment continued to soften in May, with both major survey measures declining. The Conference Board Consumer Confidence Index eased to 93.1 in May, retreating from 93.8 in April. The University of Michigan Index of Consumer Sentiment fell sharply to 44.8 in May from 49.8 in April; however, the preliminary June reading rose to 48.9.

Pierre Villere’s Market Assessment

The AVP Pulse Index rebounded this quarter, rising +0.6% month-over-month and strengthening further on a year-over-year (+7.3%) and rolling 36-month (+13.6%) basis. The index’s upward trajectory reflects broadening momentum across the construction materials industry, supported by improving project planning activity, firming materials pricing, and growing contractor backlogs. While select indicators present a more cautious near-term picture, the overall trend remains constructive heading into the second half of 2026.

Leading indicators were largely positive this quarter, with project planning activity emerging as a notable bright spot. The Dodge Data Momentum Index advanced +5.9% month-over-month and surged +30.7% year-over-year, signaling a robust and expanding pipeline of future construction projects. Construction Confidence also improved, rising +2.2% monthly and +4.9% year-over-year, reflecting greater optimism among contractors and industry participants. The NAHB/Wells Fargo Housing Market Index posted a +3.0% gain on both a monthly and annual basis, suggesting homebuilder sentiment has stabilized after an extended period of pressure from affordability constraints and elevated borrowing costs. Architecture Billings were the lone meaningful exception, declining -3.0% month-over-month, though the metric remains +11.8% higher year-over-year — indicating that the broader design pipeline, while showing some near-term hesitation, has grown substantially over the past year.

Stabilizing forces across spending, pricing, and labor provide additional support to the outlook. Total construction spending edged up +0.4% month-over-month (+0.9% year-over-year), reflecting steady execution of active projects across both public and private segments. Construction backlogs expanded +2.3% monthly and are now +1.1% higher year-over-year, offering improved near-term visibility for materials producers and contractors alike. Materials pricing continued its gradual upward trend, with concrete products PPI rising +0.3% monthly (+3.0% year-over-year) and construction sand, gravel, and stone prices increasing +0.4% monthly (+5.7% year-over-year) — consistent with steady underlying demand. Housing starts pulled back modestly (-2.8% monthly) but remain +4.6% above year-ago levels, while the Case-Shiller National Home Price Index rose +0.7% on both a monthly and annual basis, reinforcing that residential real estate values continue to hold firm. On the labor front, the construction unemployment rate ticked up marginally (+0.3% monthly, +0.6% year-over-year) but remains at historically manageable levels. Industry stock prices dipped -0.7% monthly, though the +20.1% year-over-year gain reflects sustained investor confidence in the sector’s longer-term fundamentals.

It is worth repeating that the AVP Pulse Index is a trend measure, like an arrow, albeit a crooked one; it measures a rolling 36-month period that points up or down depending on the direction of the construction industry. Despite the recent disruptions, we remain optimistic that current softness will prove temporary and that long-term fundamentals supporting the construction materials industry remain favorable.

About Allen-Villere Partners

Allen-Villere Partners (“AVP”) is the premier mergers & acquisition advisors and valuation services firm to the construction materials industry, focused exclusively on the ready-mixed concrete, construction aggregates, concrete products, and asphalt industries. For over 40 years, AVP has developed a special emphasis on representing the independently owned, middle-markets companies that play such a key role in the competitive landscape of construction materials. With over 60 years in combined experience and highly specialized, industry-specific skills, Allen-Villere Partners has a national reputation for excellence in its client representation.

Track Record

  • Valued over 600 companies in this industry over the last 40 years
  • Sold over 100 companies in the construction materials industry
  • Client relationships in more than 44 states
  • Completing deals in this healthy mergers & acquisitions environment