Construction Association Officials Warn that Prices for the Materials Contractors Need to Build Projects are Rising Far Faster than What Firms are Able to Charge to Build Those Projects
The producer price index for inputs to new nonresidential construction rose 1.8 percent in May and 8.4 percent from May 2025, the largest year over year jump since the pandemic, according to an analysis by the Associated General Contractors of America of government data released today. Association officials warned that contractors have not been able to pass along most of those price increases to their clients, and are getting squeezed by the rapid increase in costs for the things they need to build projects.
“Runaway prices for key construction inputs are pushing up costs twice as fast as the 4.2 percent rise in the consumer price index,” said Ken Simonson, the association’s chief economist. “Contractors are being hit by a double whammy of rising materials prices and much lower increases in what they can charge for new projects.”
The 8.4 percent annual increase in construction input prices was the most since 2021 and substantially outpaced the 3.5 percent rise in contractors’ bid prices, as indicated by the index for new nonresidential building construction, Simonson noted. That disparity suggests contractors’ margins are being squeezed by the ongoing rise in input costs.
Energy-related inputs continued to post steep increases in May. Diesel fuel prices more than doubled over 12 months, rising 105.9 percent since May 2025 and 19.9 percent in the latest month alone. Truck transportation of freight, a measure of the costs for the thousands of deliveries required at many jobsites, climbed 3.4 percent for the month and 17.3 percent year over year.
Metals prices also continued to increase sharply. Aluminum mill shapes soared 48.8 percent from May 2025 and 4.2 percent in the most recent month, while copper and brass mill shapes increased 26.8 percent over the year and 4.3 percent for the month. The price index for structural steel—fabricated bar joists and rebar—rose 15.6 percent over 12 months, including a 1.0 percent rise from April to May.
Association officials noted that turmoil in the Middle East and ongoing questions about possible new tariffs are contributing to the rising materials prices at a time when demand for construction, outside of data centers, is relatively soft. They said resolving trade disputes with other countries will help with materials prices. And they urged Congress to pass a new highway and transit bill to help boost demand for construction.
“There are steps federal officials can take to address rising materials prices and help contractors manage these growing costs,” said Jeffrey D. Shoaf, chief executive officer of the Associated General Contractors of America. “Providing certainty on tariff levels will help with materials prices, while passing a new transportation bill by the end of September will help provide greater certainty for construction demand.”
View producer price index data.