Construction costs continue to creep upward across the industry as higher prices for steel, copper, electrical equipment, and other key materials push overall input costs higher, according to the latest analysis from Associated Builders and Contractors. September’s Producer Price Index data shows a 0.2% increase in construction input prices — a modest monthly rise but part of a broader trend that is squeezing contractors’ budgets and complicating procurement planning.
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ABC reported that overall construction input costs now sit 3.5% higher than a year ago, with nonresidential construction inputs up 3.8%. Materials central to the power sector, including copper wire, cable, and switchgear, are experiencing some of the steepest spikes. Iron and steel prices are up 9% year-over-year, while copper wire and cable climbed 9.1%, and switchgear jumped 10.3%, the report found.
“Construction input prices rose for the fifth straight month in September,” said Anirban Basu, chief economist at ABC. “While that represents the longest streak of monthly increases since the first half of 2022, those increases are relatively modest. Materials prices have risen at a 3.2% annualized rate since April, a rate that is faster than ideal but nowhere near the escalation that occurred in 2021 and 2022.”
While the increases may be smaller than the dramatic swings seen during the height of the pandemic, the latest data still illustrates a challenging environment for contractors. The Associated General Contractors of America noted that lingering cost pressures — combined with ongoing tariff uncertainty — are disrupting procurement schedules and complicating risk management.
That unpredictability is a growing concern for contractors trying to maintain steady project timelines, said Macrina Wilkins, senior research analyst at AGC. “Persistent input-price pressure, even when the increases are modest, creates a stop and go rhythm in procurement and production instead of a steady flow contractors and suppliers need,” Wilkins said. “These month-to-month swings make it harder for firms to plan confidently and protect already thin-margins.”
The lack of clarity around tariffs also looms over the months ahead. Ongoing policy debates regarding iron, steel, aluminum, and copper imports are expected to influence price movements — potentially sharply — depending on how trade decisions unfold.
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“Unfortunately, it’s unclear how higher tariffs on key materials like iron and steel and aluminum and copper will affect prices over the next several months, and it’s noteworthy that commodities related to those materials have exhibited significant year-over-year price increases,” said Basu. “Despite the prospect of ongoing materials price escalation, contractors remain cautiously upbeat about their profit margins and sales over the next six months.”
Not all materials categories moved in the same direction. Energy inputs offered a rare bit of relief: natural gas prices fell 8.7%, unprocessed energy materials dropped 3%, and crude petroleum dipped 1.7% in September. Those declines helped counterbalance some cost increases elsewhere, though not enough to offset the cumulative pressure on construction budgets.
Despite that limited relief, contractors remain in a tight position. Many are dealing with a widening gap between rising material costs and softer bid prices — a trend AGC said is putting significant pressure on firms at a time when portions of the commercial construction market are already weakening.
“Contractors can manage 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 firms more confidence to plan for the work ahead.”
Across the industry, firms are increasingly focused on risk mitigation strategies, including locking in prices earlier, adjusting contract structures, and emphasizing preconstruction planning. Still, many acknowledge that market volatility is likely to persist until global trade policies, manufacturing capacity issues, and supply chain constraints become more predictable.
Originally reported by Sebastian Obando in Utility Dive.
