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Minneapolis Fed survey detects decline in regional construction activity

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Published  May 28, 2025 4:09pm CDT
Economy
FOX 9
Construction on Hennepin Ave has businesses struggling

Construction on Hennepin Ave has businesses struggling

Business in Uptown Minneapolis are struggling with the ongoing construction on Hennepin Avenue. FOX 9's Maury Glover has the latest.

The Brief

    • The Minneapolis Federal Reserve surveyed 252 construction businesses across its six-state region on activity during the past six months.
    • 52% reported a decline in activity compared to the same period last year.
    • Companies say their biggest challenge is uncertainty around trade policy and its impact on material costs.

MINNEAPOLIS (FOX 9) - The Federal Reserve Bank of Minneapolis has released its twice a year survey results of the construction sector which shows businesses reporting a decline in construction activity.

Minneapolis Fed construction survey

What we know:

The Minneapolis Fed partners with 50 associations in the 9th district that includes Minnesota, Montana, North and South Dakota, the Upper Peninsula of Michigan and northwestern Wisconsin.  The survey was completed by 252 respondents and measured construction business changes between November 2024 through April of this spring.

The results of the survey point toward declining construction activity with companies trying to navigate persistent cost increases, labor challenges including hiring and salaries, and uncertainty for business and trade policies for the next six months.

By the numbers:

The survey found 53% of construction businesses reported a decline in activity compared to the same period last year.  The Fed’s survey investigator, Erick Garcia Luna, considers it a significant drop, and it highlights the challenges the sector may be facing.  Only a quarter of the respondents said construction activity has improved.

When it comes to backlogs in business, or the projects that have yet to be started, the survey found a 58% reduction in those backlogs due in part to clients holding off on projects.

When it comes to challenges, 31% of companies cited government policies and regulation as their number one obstacle. 

As for the second-biggest challenge, 28% said it was the increased competition for available projects to bid on.

Labor availability was the third-biggest challenge at 13%.

Government policy impacts

What they're saying:

Trade policies from the Trump Administration appear to have an influence on the survey results, pointing toward a reduction in construction work and clients putting out projects for bid.

"Business relies heavily on planning," said Garcia Luna, the survey investigator.  "And the construction industry is particularly susceptible to any disruptions in that planning."

Government trade policies are impacting material costs and construction businesses are not able to pass many of those costs onto their clients, which may indicate profit margins are getting squeezed.

"While firms are facing higher costs, they aren’t always able to raise their prices accordingly," Garcia Luna explained.  "This creates a challenging situation where many companies have to absorb those additional costs which can put significant pressure on their profit margins."

Looking ahead to the next six months, companies indicated they are anticipating slower growth with interest rates and increasing prices adding to their uncertainty.

"Without some more certainty, many companies will say that they are finding it difficult to plan and execute their projects effectively," said Garcia Luna.

EconomyBusinessMinneapolis