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Dive brief:
- Construction input prices rose 0.2% in September, driven largely by key materials such as iron and steel, according to an Associated Builders and Contractors analysis of the U.S. Bureau of Labor Statistics’ Product Price Index data.
- According to ABC, input costs are 3.5% higher than a year ago for general construction and 3.8% higher for non-residential work.
- “Construction input prices rose for the fifth consecutive month in September,” Anirban Basu, ABC’s chief economist, said in the statement. “While this represents the longest streak of monthly increases since the first half of 2022, these increases are relatively modest. Materials prices have risen at an annualized rate of 3.2% since April, a rate that is faster than ideal but nowhere near the escalation that occurred in 2021 and 2022.”
Diving knowledge:
The latest PPI data, which was pushed back due to the government shutdown, is still showing cost pressures among the main construction inputsaccording to the Associated General Contractors of America.
This pattern holds unpredictable hiring for contractors across the board, said Macrina Wilkins, senior research analyst at AGC.
“Persistent input price pressure, even when increases are modest, creates a stop-and-go rhythm in procurement and production rather than a steady flow that contractors and suppliers need,” Wilkins said in the statement. “These month-to-month changes make it difficult for companies to plan with confidence and protect already thin margins.”
Several key materials posted significant year-on-year gains, the data showed. For example, steel products rose 12.4% over the past 12 months, while switchgear, switchgear and industrial control equipment rose 10.3% year-on-year, according to ABC. Copper wire and cable prices also increased by 9.1% over the past year.
“Unfortunately, it is unclear how higher tariffs on key materials such as iron and steel and aluminum and copper will affect prices in the coming months, and it is noteworthy that commodities related to these materials have shown significant year-over-year price increases,” Basu said. “Despite the prospect of an ongoing material price escalation, contractors remain cautious with their profit margins and sales for the next six months.”
On that positive note, energy categories were one of the few areas to offer relief in September, according to the data. Natural gas and unprocessed energy materials prices fell 8.7% and 3%, respectively, and crude oil prices fell 1.7%.
But contractors remain caught between higher material costs and softer bid prices, according to the AGC report. This mismatch adds pressure at a time when several commercial construction segments show weakness.
“Contractors can handle modest cost increases, but they need a predictable environment to keep projects moving,” said AGC CEO Jeffrey Shoaf. “Greater clarity on tariff policy and progress on outstanding trade issues would help stabilize materials markets and give companies more confidence to plan for future work.”
