Building Momentum: Why Construction Materials ETF Options Are Worth Your Attention

The U.S. construction sector has shown impressive staying power despite economic headwinds, with total construction expenditures climbing 0.5% in August—marking eight consecutive months of growth. Year-to-date performance tells an even stronger story: a 7.4% increase from the prior year demonstrates the sector’s fundamental health even under pressure from elevated inflation and borrowing costs.

What’s particularly encouraging for materials-focused investors is that producer prices for construction inputs have actually retreated. The Producer Price Index for materials and components dipped 0.2% annually as of August, providing builders with relief and potentially benefiting construction materials ETF holdings.

Where Growth Is Concentrated

The Residential Construction Rebound

Single-family housing construction has emerged as a primary engine of activity. After years of inventory shortages, the sector posted its fourth straight monthly gain in August, advancing 0.6%. This resurgence directly benefits homebuilder-focused ETFs and their underlying construction supply chain holdings. Multifamily projects, by contrast, face headwinds as numerous apartment complexes prepare for delivery in coming periods.

Non-Residential Strength Spans Multiple Segments

The commercial and industrial construction space has expanded for 15 consecutive months, growing 0.4% in August. Manufacturing facilities and infrastructure investment lead this charge, with public spending on power systems, transportation networks, and highway improvements accounting for three-quarters of monthly increases. Lodging and hospitality construction also maintains momentum, though warehouse and retail segments show weakness.

ETF Vehicles to Consider

SPDR S&P Homebuilders ETF (XHB)

This fund tracks homebuilding within the broader S&P market. With no single position exceeding 4.16% of assets and a 35 bps expense ratio, it offers diversified builder exposure while maintaining focus on the single-family residential growth story.

iShares U.S. Home Construction ETF (ITB)

Based on the Dow Jones home builders subset, this market-cap-weighted vehicle measures pure residential construction performance. The 40 bps fee structure provides reasonable cost access to the sector’s upside.

Invesco Building & Construction ETF (PKB)

This actively-managed construction vehicle selects among U.S. building companies using fundamental and valuation metrics. With position sizes capped at 5.26% and a 57 bps expense ratio, it captures broader construction activity including materials and equipment suppliers alongside builders.

iShares U.S. Infrastructure ETF (IFRA)

Targeting companies with infrastructure exposure, this index tracks entities benefiting from domestic infrastructure deployment. Its 0.91% maximum position size and modest 30 bps fee make it an attractive option for capturing the infrastructure-driven construction materials ETF opportunity.

The Investment Case

Construction activity’s persistence amid economic uncertainty suggests staying power in both residential recovery and infrastructure development. For investors seeking exposure to this resilience, these ETFs offer distinct angles—from pure homebuilder plays to broader construction materials and infrastructure participation. The modest uptick in building costs combined with strong demand creates an environment where construction-related holdings warrant consideration in a diversified portfolio.