Material price rises could be ‘a real headwind’ to construction activity

That’s according to Associated Builders and Contractors’ (ABC) latest analysis of Bureau of Labor Statistics Producer Price Index data.

Overall construction input prices were 3.1% higher than a year ago in February, with non-residential input prices 3.7% higher.

All three energy categories increased, with natural gas and unprocessed energy materials prices up 10.9% and 6% respectively, while crude prices were up 4.7%.

“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% annualised 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.”

Since Basu’s comments, the price of a barrel of Brent crude has risen past $115 per barrel (on 19 March).

Separately, the Associated General Contractors of America (AGC) also warned that the Iran war was likely to trigger more construction inflation.

Ken Simonson, the association’s chief economist, said, “Major increases in the prices for diesel fuel and key metals occurred before the start of the Iran war. The disruption of oil, natural gas, and aluminum supplies from the Middle East is pushing up construction costs further and causing owners to delay projects.”

Even before the war started, producer price indexes for aluminum mill shapes and steel mill products jumped by 39.1% and 20.9%, respectively, from February 2025 to February 2026.

Other metal products used in construction also posted sizable gains. Fabricated structural metal bar joists and rebar rose 20% year on year, while copper and brass mill shapes increased 15.1% compared to February 2025.