North Carolina Construction News staff writer
The U.S. civil infrastructure sector is entering 2026 with a sense of “modest but broadening optimism,” according to the latest Civil Infrastructure Construction Index (CICI) released by FMI.
The first-quarter CICI reading rose to 52.1, up from 50.6 in the final quarter of 2025. Any score above 50 indicates expansion in the sector. While demand for transportation, water, and utility projects remains high, the report warns that the industry’s primary challenge has shifted from finding work to finding the people to build it.
“The defining constraint entering 2026 is not a lack of opportunity, but the industry’s capacity to execute profitably against growing workloads and a persistently tight labor market,” the report stated.
Confidence is being fueled by “strong local indicators,” including funded projects and robust public-sector investment. Contractors reported notably higher confidence in their regional markets compared to the national economy.
- Backlog Strength: The aggregate backlog index jumped to 57.3, up from 52.8 in the previous quarter.
- Runway: The median firm reported a backlog of approximately 12 months, with averages exceeding 15 months, providing a “clear runway” into late 2026.
Regional outlook: While most markets are stable, the report noted “a few areas of concern” specifically for highway contractors in Pennsylvania and Maryland.
While material prices have stabilized—described by contractors as “predictable while still painful”—labor remains a significant “margin burden”.
Approximately 60% of respondents identified a limited supply of skilled and craft workers as a top risk for 2026. This shortage is impacting efficiency; the report’s productivity index remained just below the expansion threshold at 49.0.
“Workforce shortages, elevated turnover and the premium required to attract experienced talent all keep costs stubbornly high,” the report noted, adding that labor is a “less controllable problem than materials”.
FMI’s long-term forecast predicts steady growth across several civil segments through 2029:
- Transportation: Expected to grow at a compound annual growth rate (CAGR) of 3% from 2025 through 2029.
- Highway and street: Forecasted to see a 0% CAGR, reaching roughly $160.7 billion by 2029.
- Power and water: These segments continue to show strong momentum, with respondent confidence reaching its peak at the 36-month horizon.
To combat labor shortages, interest in artificial intelligence is growing, though adoption remains “deliberate”. 57% of firms report currently using some form of AI or machine learning.
The primary areas slated for AI-driven improvement include project controls and business intelligence (61%), equipment optimization (39%), and estimating (37%). However, a “lack of understanding of its capabilities” remains the top barrier for 59% of respondents.
The report concludes that firms investing in “leadership depth, workforce development and disciplined backlog management” will be best positioned to handle the uneven opportunities of the coming year.