Contractors See Modest Materials Inflation Despite Energy Price Drops
Key Highlights
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Year-over-year construction input costs remain significantly elevated despite mild monthly increases
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Contractors may see short-term cost relief from sharp declines across all energy categories
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BLS input data offers an early signal for budgeting and procurement strategies heading into Q4
WASHINGTON, DC — Construction input prices rose 0.2% in September, according to Associated Builders and Contractors’ analysis of the latest Producer Price Index data from the US Bureau of Labor Statistics. Prices for nonresidential construction inputs also increased 0.2% for the month.
Despite the modest month-over-month movement, contractors continue to face steady year-over-year inflation. Total construction input prices were 3.5% higher than a year ago, while nonresidential inputs were up 3.8% compared to September 2024.
Energy Prices Continue Downward Trend
All three major energy categories declined in September, offering some relief to contractors with energy-intensive operations. Natural gas prices dropped 8.7%, unprocessed energy materials decreased 3.0% and crude petroleum prices were down 1.7% for the month.
“Construction input prices rose for the fifth straight month in September,” said ABC Chief Economist Anirban Basu. “While that represents the longest streak of monthly increases since the first half of 2022, those increases are relatively modest. Materials prices have risen at a 3.2% annualized rate since April, a rate that is faster than ideal but nowhere near the escalation that occurred in 2021 and 2022.
“Unfortunately, it’s unclear how higher tariffs on key materials like iron and steel and aluminum and copper will affect prices over the next several months, and it’s noteworthy that commodities related to those materials have exhibited significant year-over-year price increases,” said Basu. “Despite the prospect of ongoing materials price escalation, contractors remain cautiously upbeat about their profit margins and sales over the next six months, according to ABC’s Construction Confidence Index.”