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Dive brief:
- Construction input prices rose 0.7% month over month in January due to materials affected by tariffs, according to a Builders and Contractors Association analysis of producer price index data from the US Bureau of Labor Statistics.
- Both general and non-residential construction prices rose 2.3% and 2.9%, respectively, compared to a year earlier, according to the report. On an annualized basis, non-residential costs rose to a “bottleneck” 7.1%, the report said.
- Most of January’s monthly increase can be traced to tariff-induced increases in products such as copper wire, cable, iron, steel and industrial control equipment, said Anirban Basu, ABC’s chief economist.
Diving knowledge:
Despite the sharp jump related to tariffs on some products, the increase in overall material prices to start the year “is not particularly worrisome at this time,” Basu said in the statement.
Most of the 2.9% increase in non-residential materials prices over the past year, for example, occurred in the earlier part of that period. The jumps since then have been virtually flat for the past few months, Basu said.
In fact, non-residential construction input prices rose about 0.2% since September, it added.
But recent tariff concerns could put new pressure on those prices.
“Trade policy may continue to put upward pressure on certain input prices,” Basu said. “Still, input escalation is unlikely to increase too sharply as long as energy prices remain tame and demand remains subdued.”
However, the tariffs are still inflating the cost of key materialsaccording to a report from the Associated General Contractors of America. High taxes on imported metals and products are allowing U.S. vendors to raise the costs of construction materials and equipment, said Ken Simonson, AGC’s chief economist.
For that reason, AGC economists urged federal officials to quickly revamp key infrastructure measures, such as the surface transportation bill, to give domestic suppliers the security they need to ramp up production. This, in turn, should ease some of the pressure from escalating prices.
“It will be difficult for suppliers to increase production if they have no idea of future demand for their products,” said Jeffrey Shoaf, CEO of AGC. “Passing the surface transportation bill on time, the largest federal construction measure, will give domestic suppliers the security they need to increase production and offset the impacts of tariffs.”
