Credit Signals in Construction: Early Warnings for Lenders and Risk Leaders

Insights from Experian’s September 16, 2025 Commercial Pulse Report

This week’s Experian Commercial Pulse Report shines a spotlight on one of the most critical yet vulnerable sectors in the U.S. economy: construction. The industry has experienced significant growth over the last seven years, but fresh data reveals mounting signs of financial stress that commercial lenders and Chief Risk Officers should be closely monitoring.

Watch the Commercial Pulse Update

Construction Growth Reaches New Heights

Since 2018, Construction GDP has increased by 53%, reaching $1.34 trillion in Q1 2025. The sector now makes up 4.48% of total U.S. GDP, just below its pandemic-era peak in mid-2020.

At the same time, construction employment has rebounded strongly, with more than 8.3 million Americans now working in the sector — a 9% increase over pre-pandemic levels. On the surface, construction appears to be thriving.

But a closer look reveals signs of market cooling:

• Building permits have declined, suggesting future construction volume may slow.
• Housing inventory has returned to pre-pandemic levels, leading to rising vacancy rates.
• Material costs — especially for insulation and drywall — remain stubbornly high, placing added pressure on operating margins.

These trends reflect a shift in the construction cycle — from expansion to potential contraction — and the financial effects are already showing up in commercial credit behavior.

Credit Stress Is Building

Experian’s data highlights a credit environment that is tightening for construction businesses:

• The number of active commercial accounts has plateaued, signaling reduced borrowing activity.
• Credit inquiries have been rising since late 2021, showing that more businesses are seeking financing — but lenders appear increasingly cautious.
• The number of new open trades has declined, indicating less credit is being extended even as demand grows.

Most notably, delinquency rates are climbing.

As shown in the chart above, the 90+ day delinquency rate rose sharply in 2022 and, after a brief cooling period, resumed an upward trend in 2024. As of May 2025, the rate has reached 0.07%, its highest point in several years.

This aligns with a broader concern: construction businesses are facing more financial pressure, even as headline indicators remain strong.

What This Means for Risk Leaders

For CROs, credit strategists, and commercial underwriters, these trends serve as early warning signals.

• Delinquency rates and inquiry volume should be integrated into portfolio monitoring systems as forward-looking indicators.
• Underwriting score thresholds may need adjustment for construction-related businesses, especially those showing increased credit-seeking behavior without corresponding trade activity.
• The broader credit environment is tightening, and construction — historically a cyclical industry — is often among the first to feel the impact of shifting economic conditions.

By monitoring these sector-specific metrics in real time, lenders can get ahead of emerging risks before they spread to adjacent sectors like real estate, materials, and heavy equipment.

Construction is still contributing significantly to economic growth — but that growth is coming under strain. Rising costs, declining credit access, and increasing delinquencies are creating a complex risk profile that demands close attention.

For the full analysis, including all small business credit trends, read the latest Experian Commercial Pulse Report.

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