Dive Brief:

• Construction input prices increased 0.5% in March, while nonresidential input prices climbed 0.6%, both unusually steep jumps, according to an analysis by Associated Builders and Contractors of U.S. Bureau of Labor Statistics data.
• Both overall and nonresidential input prices are now 0.8% higher than a year ago and sit more than 40% higher compared to February 2020, largely due to a sharp rise in natural gas, steel, copper and lumber prices.
• The price escalations across the board reflect early impacts from tariffs and mark the third straight month of price jumps, said Anirban Basu, ABC chief economist.

Dive Insight:

“Construction input prices increased at a rapid pace for the third consecutive month in March and have now risen at a 9.7% annualized rate through the first quarter of 2025,” said Basu. “The emerging effects of tariffs are glaring in the March data release.”

Pressure is mounting for owners and builders heading into the second quarter, especially as tariff-related uncertainty clouds purchasing and pricing decisions, according to the Associated General Contractors of America.

Suppliers hit contractors with a wave of price hike notices in March, even before new tariffs took effect, according to AGC. That volatility is making it harder to plan and budget for both public and private sector projects, said Ken Simonson, AGC chief economist.

“Lumber and metals prices shot up in March, while contractors’ inboxes are bulging with ‘Dear valued customer’ letters announcing further increases for many products,” said Simonson. “Rapid-fire changes in tariffs threaten to drive prices higher for many essential construction goods.”

Contractors have been accelerating procurement to lock in prices early, said Michael O’Reilly, vice president at Rider Levett Bucknall, a New York City-based construction consultancy firm. He said general contractors are largely trying to be proactive and have procurement discussions early on projects, where possible.

“The latest PPI data indicates one of the largest monthly increases that we have seen in the past 36 months,” said O’Reilly. “We are advising clients to consider additional, separate contingencies depending on the stage of the project and the potential exposure to risk.”

The monthly increases mark the first time since September 2023 that input prices jumped for three consecutive months, said Simonson. Construction input prices have now increased at a 9.7% annualized rate through the first quarter of 2025, said Basu. 

“While contractors remain busy for the time being, according to ABC’s Construction Backlog Indicator, this pace of input price escalation, coupled with rising uncertainty, will cause projects to be delayed and canceled if it persists for any meaningful length of time,” Basu said.

AGC urged the Trump administration in its release to reconsider new tariffs, at least until there was greater market certainty about the impacts of those that have already been put in place.

“Our members are trying to deliver the best value for the public and private sector clients they serve,” said AGC CEO Jeffrey Shoaf. “But it is hard to deliver that best value when you have no idea how much you are going to have to pay for many of the materials required to build projects.”