ABC Chief Economist Anirban Basu isn’t calling for a recession in 2026—but he’s not celebrating, either.
Speaking at the Construction Executive’s 2025 Q3 Construction Economic Update and Forecast on October 8th, Basu described an economy that’s “built on a narrow foundation of growth” with resilience driven by artificial intelligence infrastructure and stock market wealth. But he also said the economy is showing signs of weakness beneath the surface.
Manufacturing investment, he noted, has slowed, even as costs for materials and labor remain high. Basu attributed much of the pressure to tariffs and policy uncertainty coming out of Washington, D.C.
While the US macro economy is not currently in a recession, Basu stated, “one of those segments [of the economy] is construction.” He noted that “we need the built environment to be radically transformed to accommodate the economy as it’s evolving.”
The Construction Slowdown
Despite the Federal Reserve’s rate cut last September, Basu warned that inflation isn’t retreating fast enough to bring meaningful relief due to slowing growth and persistent inflation. “We need inflation to fall more aggressively than it is,” he said. (On October 29th, interest rates were reduced by a quarter of a point, bringing the benchmark rate to a range of 3.75% to 4.00%.)
Within the construction industry, multi-family housing and commercial development have stalled as projects are “no longer penciling out,” said Basu. Data centers and public infrastructure spending have provided much of the industry’s momentum, but both may prove temporary. The Infrastructure Investment and Jobs Act of 2021, which injected billions into public projects, expired on September 30th, so now state and city budgets are under strain.
“Twenty of the 25 largest cities in America face fiscal challenges balancing their budgets in 2026,” stated Basu, who warned that growth would continue to slow if the federal government does not reauthorize infrastructure expenditures.
Looking Toward Late 2026 and Beyond
Still, Basu foresees a rebound in construction activity by late 2026 or 2027 as interest rates finally ease at which time projects will start to pencil out. That rebound may come slowly, as project owners regain confidence and postponed projects restart. However, Basu cautioned that the labor market will remain tight—and more expensive—as immigration restrictions continue to limit the supply of skilled workers.
Bottom Line
Anirban Basu’s 2026 forecast is one of measured hope: a soft first half of the year, a gradual rebound in the second, and a construction industry poised to grow again if inflation and policy cooperate. At that time, assuming interest rates work for us, Basu said we should soon see “a ton of construction.”