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Dive Brief:
- Construction input prices rose 2.2% month over month in September and 11.2% year over year, the biggest annual increase in nearly four years, according to an Associated Builders and Contractors analysis of federal producer price index data released Thursday.
- Rising fuel costs caused by the conflict in Iran, along with the impact of tariffs on key materials, drove a substantial part of the increase during the month, according to ABC analysis, which focuses on the prices of physical commodities used in construction.
- Due to persistently escalating material prices, more than one in four contractors are now waiting profit margins to hire over the next six months, said Anirban Basu, ABC’s chief economist.
Diving knowledge:
Construction companies are absorbing most costs increase amid soft demand for projects outside the data center boom, according to analysis by the Associated General Contractors of America.
The biggest price increases hit petroleum products, according to AGC’s analysis, which, in addition to commodity prices, includes the costs of construction services. Metal prices have also risen sharply since then President Donald Trump introduced tariffs last year
In addition to pricing, contractors are facing extreme material availability challenges, with suppliers’ order books full until spring 2027, according to AGC. Some companies have been told they will receive only a small portion of the steel beams they had ordered and that alternative suppliers are rejecting orders from new customers, according to AGC.
“Construction firms are being hit by a double whammy of tariff- and war-induced material cost increases as higher metals and fuel costs permeate an ever-widening price range,” Ken Simonson, AGC’s chief economist, said in the report. “To make matters worse, delivery times for key steel components have been extended, making it difficult for contractors to keep projects on schedule.”
To manage costs and soft demand, AGC officials urged Congress to address trade disputes and pass a new multi-year invoice for surface transport. Funds are critical to the construction industry, especially as infrastructure works serve as one of the few reliable construction sources out of the data center boom.
“Having a new transportation bill is necessary before states can plan and launch major projects that will increase construction demand and create opportunities for economic growth,” AGC CEO Jeffrey Shoaf said in the report. “Resolving trade disputes will ease price uncertainty holding back private construction.”
