Construction input prices edged up 0.2% in August, fueled largely by higher costs for iron and steel, according to an Associated Builders and Contractors (ABC) analysis of the U.S. Bureau of Labor Statistics’ Producer Price Index data. The increase brings input costs 2.3% higher year-over-year, and 2.6% higher for nonresidential construction.
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“The increase would have been larger if not for declining oil and natural gas prices,” said Anirban Basu, ABC chief economist. “Prices rose at an especially rapid pace in some of the categories most affected by tariffs.”
The Associated General Contractors of America (AGC) pointed to ongoing tariff hikes as a major factor driving volatility in construction materials markets.
“There is a limit to how many price increases the market can absorb before owners put projects on hold,” said AGC CEO Jeffrey Shoaf. “The more the administration does to resolve trade disputes, provide more certainty and lower punitive tariff levels, the more demand for construction should rebound.”
That uncertainty has already had significant consequences. Ken Simonson, AGC chief economist, noted that “about 43% of contractors reported at least one project in the past six months had been canceled, postponed or scaled back because of higher costs,” citing an AGC-NCCER survey.
“The huge increases in steel and aluminum tariffs appears to have enabled domestic producers to push up their selling prices,” Simonson added. “These price increases are prompting some owners to rethink planned construction projects.”
While current increases remain below the double-digit spikes of 2021 and 2022, the cumulative impact continues to weigh heavily on the industry. Paul Giorgio, chief operating officer at Los Angeles-based Eldridge Acre Partners, explained that “overall inputs to nonresidential construction sit close to 44% higher than February 2020, despite the essentially flat growth this month.”
Still, Giorgio noted the increases were expected: “The construction market is driven by supply and demand, and the demand is much lower than the previous years, resulting in contractors and subcontractors especially being very competitive with their pricing to win work. Moreover, the impacts of material tariffs have not materialized as seen in the latest CPI number, given the boost in domestic production and strategic alternative sourcing from subcontractors and suppliers.”
The AGC-NCCER survey also found that two in five contractors raised their own prices to offset tariff-driven costs. Another 16% of firms absorbed the costs themselves or worked out cost-sharing agreements with suppliers, while others turned to early procurement strategies to avoid future hikes.
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Despite the challenges, many firms expect prices to continue climbing. Nearly 40% of contractors anticipate further materials cost increases in the coming months.
Iron and steel prices are already up 9.2% year-over-year, while copper wire and cable—critical for data center construction—jumped 13.8%. Switchgear, switchboard, and industrial control equipment rose 10.5% over the same period.
Yet optimism remains among builders. Basu noted that “contractors remain broadly optimistic about their profit margins over the next six months.”
Industry officials acknowledge progress in resolving some trade disputes under the Trump administration, but emphasized the importance of securing deals with China, Canada, and Mexico to stabilize pricing.
As Shoaf put it, the industry’s future balance depends on policy as much as supply chains: “There is a limit” to how many increases contractors and owners can withstand before development slows further.
Originally reported by Sebastian Obando in Construction Dive.
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