Smarter Forecasting: 4 Rules to Help Construction Companies Plan Ahead in Volatile Markets

As the construction industry continues to navigate inflation, supply chain instability, and shifting regulations, one thing has become clear: traditional economic forecasting methods are no longer enough. The last five years have exposed the limitations of static models that can’t keep pace with today’s rapid changes. Construction companies are now recognizing the urgency of rethinking how they plan for the future.

According to Taylor St. Germain of ITR Economics, the key lies in developing adaptive, insight-driven forecasting models grounded in a few fundamental principles. These four rules offer construction businesses a framework for building reliable forecasts and strategic agility in a volatile market.

1. Use Rate-of-Change to Identify Leading Indicators

Forecasting success starts with understanding the relationship between business performance and broader economic trends. St. Germain emphasizes the importance of identifying leading indicators—metrics that tend to move ahead of business outcomes.

These indicators can be internal, such as project starts or estimates, or external, such as the Architecture Billings Index, interest rates, or housing permits.

The real advantage comes from applying rate-of-change analysis, which evaluates trends by comparing their percentage change over time, not just raw values. This technique helps spot turning points earlier and smooth out short-term noise.

“A construction company can then identify, for example, that architecture billings rise three to six months before a sales increase and incorporate that rule into their forecast model.”

2. Know How to Respond to the Market

Once trends are identified, the next step is determining how to act on them. Forecasting is not just about anticipating what’s coming—it's about using that insight to guide decisions.

Construction firms should monitor both general economic signals, such as inflation or interest rates, and industry-specific data, such as labor availability or nonresidential spending.

St. Germain recommends linking forecast outputs to real-world actions—like fast-tracking equipment purchases when demand spikes or entering emerging markets like data centers before competitors.

“Businesses should always monitor for markets that indicate new demand — such as data centers, currently — so that they can pivot into emerging growth sectors ahead of the competition.”

3. Continually Grow Internal Capacity

Forecasting tools are only as effective as the people using them. For smaller firms, economic analysis may rest on the shoulders of a single executive. Larger companies might employ financial analysts or dedicated teams.

“In any event, businesses must ensure that someone is always responsible for monitoring, projecting and interpreting trends as they arise,” says St. Germain.

Companies should also invest in analytics tools such as Power BI, Tableau, or industry-specific platforms from economic consulting firms. These tools improve how data is visualized and interpreted, making it easier to turn insights into action.

4. Adapt the Model to the Market

No matter how well a forecast is built, it must be flexible. Economic conditions shift, and models that fail to adapt become obsolete.

St. Germain recommends a modular design approach where inputs can be changed easily, and assumptions aren’t hard-coded. Companies should also define rules for reviewing their models—such as reassessing forecasts when actual revenues dip 10% below projections.

“It is very important, however, not to overreact to short-term noise. Not every fluctuation indicates a major unforeseen trend,” he advises.

Long-term indicators, like 12-month moving averages, are better suited to capture real growth or decline. Even when conditions like tariffs temporarily affect revenue, broader cycles often reveal that a company is still in expansion mode.

From Uncertainty to Strategic Control

Many construction firms feel as though they’re at the mercy of the broader economy. But with a dynamic and disciplined forecasting model, they can regain control.

“An effective projection model tames that uncertainty — not through rigid prediction of the future, but through intelligent analysis of and preparation for the likeliest contingencies,” St. Germain concludes.

By implementing these four rules—leveraging leading indicators, aligning strategy with trends, investing in analytical capacity, and building flexible systems—construction companies can gain the clarity and confidence to make smarter long-term decisions.

Originally reported by Taylor St. Germain in For Construction Pros.