Cement industry sees prolonged slowdown, but data centers remain bright spot, new forecast says

The U.S. cement industry expects construction demand to remain sluggish through at least the next year as high interest rates continue to weigh on residential and commercial building activity, but data centers remain one of the few sectors expected to post strong growth, according to a new market forecast released by the American Cement Association.  

The association’s August Summer Forecast Update says the long-awaited rebound in construction has been delayed, with interest rates expected to remain elevated until at least late 2027. While the industry no longer expects cement demand to decline further, it also sees few catalysts for meaningful growth in the near term.  

“For the past several years, the cement industry has been awaiting a recovery in demand,” the report states. “While that narrative is still likely to eventually unfold, it will not happen in the near term. Instead, a state of malaise is expected to continue for a protracted period.”  

The forecast carries particular significance for the Rio Grande Valley, where billions of dollars in industrial investment are tied to construction activity, including liquefied natural gas export terminals, manufacturing facilities, logistics projects, data centers and planned energy infrastructure.

Data centers continue to stand out

Among all nonresidential construction sectors tracked by the association, data centers remain the clear exception.

The report says nearly every traditional commercial construction category is expected to finish 2026 with declining inflation-adjusted spending. Data center construction, however, remains “red hot,” prompting the association to increase its growth expectations through 2028.  

That outlook comes as South Texas communities continue debating large-scale data center projects.

Brownsville officials are considering new zoning regulations that would steer future data centers into heavy industrial areas, while Cameron County and Harlingen have also grappled with proposals tied to artificial intelligence and cloud computing infrastructure.

Unlike housing or office construction, the report notes that data center investment has proven relatively insulated from higher borrowing costs because demand continues to be driven by artificial intelligence, cloud computing and digital infrastructure rather than traditional real estate cycles.  

Interest rates remain the biggest hurdle

The American Cement Association no longer expects the Federal Reserve to begin lowering interest rates until September 2027, a significant revision from its spring forecast.

Higher borrowing costs continue to suppress single-family housing construction, with the association projecting that housing starts will remain below 1 million units even in 2028 because affordability challenges and the “lock-in effect” continue to limit home sales.  

The report also notes that hiring has slowed nationally despite a resilient labor market, while inflation has climbed above 3% amid higher energy prices and geopolitical uncertainty stemming from conflict involving Iran and shipping through the Strait of Hormuz.  

Public construction outlook uncertain

The report says uncertainty surrounding the next federal surface transportation funding package is clouding the outlook for highways and other public infrastructure.

The association assumes Congress will extend current transportation funding before revisiting a larger reauthorization package next year. Under that scenario, spending on streets and highways would decline in 2027 before returning to growth in 2028. Sewer and water infrastructure also are expected to weaken as funding from the Infrastructure Investment and Jobs Act winds down.  

Recovery pushed further out

Despite the cautious outlook, the association says U.S. cement consumption is no longer expected to contract.

Instead, it projects modest growth beginning in 2027, led initially by a recovery in single-family housing before broader gains emerge across residential, nonresidential and public construction in 2028.  

For regions like the Rio Grande Valley, where industrial megaprojects continue to move forward despite broader economic headwinds, the report suggests that data centers and other large-scale industrial investments could continue supporting construction demand even as much of the nation’s building market remains subdued.