Dive Brief:
- Construction input prices increased 0.7% month to month in January due to tariff-affected materials, according to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics’ Producer Price Index data.
- Both overall and nonresidential construction input prices jumped 2.3% and 2.9% higher, respectively, compared to a year before, according to the report. On an annualized basis, nonresidential costs surged at a “blistering” 7.1%, according to the report.
- Most of January’s monthly rise can be traced back to tariff-induced increases in products such as copper wire, cable, iron, steel and industrial controls equipment, said Anirban Basu, ABC chief economist.
Dive Insight:
Despite the sharp, tariff-related leap for some products, the increase in overall materials prices to kick off the year is “not particularly concerning right now,” said Basu in the release.
The bulk of the 2.9% increase in nonresidential materials prices over the past year, for example, occurred in the earlier portion of that period. The jumps since then have been virtually flat over the past several months, said Basu.
In fact, nonresidential construction input prices ticked up about 0.2% since September, he added.
But recent tariff concerns could put renewed pressure on those prices.
“Trade policy may continue to put upward pressure on certain input prices,” said Basu. “Even so, input escalation is unlikely to rise too sharply as long as energy prices remain tame and demand remains subdued.”
Nevertheless, tariffs are still inflating the cost of key materials, according to an Associated General Contractors of America report. Steep duties on imported metals and products allow U.S. sellers to push up costs for construction materials and equipment, said Ken Simonson, AGC chief economist.
For that reason, AGC economists urged federal officials to quickly renew key infrastructure measures, such as the surface transportation bill, to give domestic suppliers the certainty needed to boost production. That should, in turn, alleviate some of the price escalation pressure.
“It will be hard for suppliers to boost production if they have no idea about future demand for their products,” said AGC CEO Jeffrey Shoaf. “Passing the surface transportation bill — the single largest federal construction measure — on time will give domestic suppliers the certainty they need to boost production and offset the impacts of tariffs.”
