The construction sector holds a crucial position in the U.S. economy, accounting for approximately 4.4% of the GDP and being tied to around $2.2 trillion in annualized spending. This sector's impact is significant and has far-reaching implications. On Monday (Dec. 2), the Commerce Department's report on construction spending revealed that it was higher than the consensus estimate, with a growth of 0.4%, while economists had expected only 0.2% growth. Such figures highlight the sector's dynamism and its ability to exceed expectations.

Capital Intensity and Payment Challenges

The construction sector is highly capital intensive, a characteristic that distinguishes it from many other industries. PYMNTS has reported that 76% of subcontractors are almost always paid with paper checks by general contractors and property owners. This slow payment process costs these firms a substantial amount, with estimates reaching $273 billion. This issue has led subcontractors to take measures such as increasing their use of personal savings for business purposes by 105% over 2023 levels. In response to these concerns, more than 9 in 10 subcontractors are willing to offer a discount of up to 5% for faster payments.