Steel and Concrete Prices Remain Elevated While Most Other Materials Stay Flat; AGC Warns That Tariff Pressures Could Reignite Cost Volatility, Undermine Benefits of New Tax and Regulatory Efforts
The producer price index for materials and services used in nonresidential construction rose 0.2 percent in June and 2.3 percent from June 2024, the largest 12-month increase since February 2023, according to an analysis by the Associated General Contractors of America of government data released today. Association officials cautioned that tariff increases due to take effect on August 1 threaten to drive up a wide range of construction costs that could further undermine demand for construction.
“The fact that construction materials prices are rising even before the steepest proposed tariffs have taken effect doesn’t bode well for what will happen in August if the promised new tariffs are implemented,” said Ken Simonson, the association’s chief economist. “Rising construction costs and economic uncertainty are already causing some owners to put projects on hold, which will only get worse if costs jump again.”
Simonson noted that tariffs on steel and aluminum were hiked to 50 percent on June 4 from the 25 percent rate that took effect on March 12. President Trump has announced a 50 percent tariff on copper to take effect on August 1. In addition, the president has threatened to impose much higher tariffs on most imports from almost all of the nations that supply vital construction materials.
Three major construction inputs contributed to the acceleration in year-over-year costs. The producer price index for aluminum mill shapes climbed 6.3 percent from June 2024 to last month, while the index for steel mill products rose 5.1 percent and the index for lumber and wood products increased 4.8 percent. Simonson noted there were much more extreme increases for certain types of steel used in construction, such as 22.5 percent for fabricated structural metal for bridges and 8.3 percent for bar joists and rebar.
Association officials said the impacts of new tariffs have the potential to undermine some of the benefits for the industry that came out of the One Big Beautiful Bill Act. That measure provided tax certainty and financial incentives for firms to modernize equipment and invest in innovative new procedures. But those benefits could be outweighed if rising materials costs prompt more developers to delay or cancel planned projects.
“The construction industry is poised to benefit from greater tax certainty as well as the administration’s efforts to streamline permitting and reduce needless regulatory burdens,” said Jeffrey Shoaf, the chief executive officer of the Associated General Contractors of America. “Finding a way to provide greater certainty on materials prices is the best way to make sure the new tax and regulatory approach have the best possible impact on economic activity.”
View producer price index data.
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