Rising Material Costs Signal Potential Headwinds for Contractors
Key Highlights
- Construction input prices increased by 1.3% in February, with nonresidential construction seeing similar gains
- All three energy categories experienced price increases, notably natural gas and unprocessed energy materials, up 10.9% and 6.0%, respectively
- Rising oil prices, nearing $100 per barrel, are expected to further raise costs through higher diesel and shipping expenses in the coming weeks and months
WASHINGTON, DC — Construction input prices climbed 1.3% in February compared to the previous month, according to Producer Price Index data released today by the US Bureau of Labor Statistics. Nonresidential construction input prices also increased 1.3% for the month.
Overall, construction input prices are now 3.1% higher than a year ago, while nonresidential construction input prices are 3.7% higher.
Prices increased in all three energy categories last month. Natural gas and unprocessed energy materials prices were up 10.9% and 6.0%, respectively, while crude petroleum prices were up 4.7% in February.
Rising Oil Prices Not Yet Factored In
“Construction materials costs surged in February due to significant increases in oil, copper, lumber and steel prices,” said ABC chief economist Anirban Basu. “Notably, this data does not reflect the precipitous increase in oil prices, which are near $100/barrel as of this morning, caused by the conflict in Iran. That will put upward pressure on construction materials prices directly by raising diesel prices and, indirectly, by raising the cost of shipping other inputs.
“While input prices are still up a relatively modest 3.1% since February 2025, they rose at a staggering 12.6% annualized rate during the first two months of 2026,” said Basu. “Which is to say, materials price escalation could serve as a real headwind to construction activity over the next several months. Fewer than 1 in 4 contractors expect their profit margins to shrink over the next six months, according to ABC’s Construction Confidence Index. Those expectations will bear close monitoring if input prices continue their rapid ascent.”
Visit abc.org/economics for the Construction Backlog Indicator and Construction Confidence Index, plus analysis of spending, employment, job openings and the Producer Price Index.