Dive Brief:
- Construction input prices increased in May at the fastest annual rate since the pandemic, according to a report from the Associated General Contractors of America.
- Overall construction materials costs increased 2.6% month over month in May and are now up 9.6% over the past year, according to an Associated Builders and Contractors analysis of the latest economic data released Thursday.
- The latest price data puts further pressure on contractor margins as material costs continue to outpace what firms can charge owners for new work, said Ken Simonson, AGC chief economist.
Dive Insight:
Fuel and metals costs drove much of the increase, according to the data. Tariff-sensitive materials, such as steel and copper, also continued to post price gains.
“Runaway prices for key construction inputs are pushing up costs twice as fast as the 4.2% rise in the consumer price index,” said Simonson. “Contractors are being hit by a double whammy of rising materials prices and much lower increases in what they can charge for new projects.”
Construction input costs have gotten pricier every month this year, according to ABC analysis.
“Construction input prices surged again in May and are now up nearly 10% year over year,” said Anirban Basu, ABC chief economist, in the release. “Oil prices, pushed higher by the ongoing Iran conflict, made a significant contribution to the rise in overall material prices, yet the greater concern is the continuing price growth in tariff-affected inputs like iron, steel and copper.”
Iron and steel prices jumped 1.4% month over month in May and are up 7% compared to 12 months ago. Copper wire and cable costs increased 7.3% month over month and skyrocketed 24.2% over the past year, according to ABC.
“Contractors remain optimistic that their profit margins will expand over the next six months,” said Anirban Basu, ABC chief economist. “Yet it appears likely that materials price escalation and stubbornly high borrowing costs could eventually weigh on profitability.”
