The cost of materials and services used in nonresidential construction rose again in July, with the producer price index (PPI) increasing by 0.5 percent for the month and 2.6 percent compared to July 2024. This marks the largest year-over-year increase since February 2023, according to an analysis from the Associated General Contractors of America based on government data released Thursday.
Industry officials are urging the Trump administration to resolve ongoing trade negotiations and reduce recently raised tariffs that have contributed to higher prices for key construction inputs such as aluminum, steel, and copper.
“Steep tariff increases earlier this year on aluminum and steel, along with a more recent tariff on raw copper, drove the producer price index for construction inputs higher for the third-straight month,” said Ken Simonson, the association’s chief economist. “Even though contractors do not generally import materials directly, it is clear that domestic producers are raising prices in line with the protection tariffs are providing them.”
Tariffs on steel and aluminum were increased to 50 percent as of July 4, up from a previous rate of 25 percent set in March. A similar 50 percent tariff was applied to raw copper starting August 1. Additional tariffs affecting most imports from nearly all countries supplying critical construction materials began in early August. These changes signal that further increases in construction costs may occur over the coming months.
Key contributors to rising costs include significant increases in three major inputs: The PPI for aluminum mill shapes jumped by 7.4 percent last month and is up 13.7 percent from July last year; steel mill products dropped slightly by 0.5 percent during July but have risen by 8.8 percent over twelve months; copper and brass mill shapes increased by 5.7 percent for the month and are up 6.9 percent year-over-year.
Construction firms are facing pressure from these material price hikes at a time when demand for some private-sector projects has weakened due to higher interest rates and economic uncertainty.
“This administration has acted quickly to craft trade agreements with many trading partners, but several outstanding deals are leaving contractors saddled with higher materials prices as tariff levels remain high,” said Jeffrey D. Shoaf, chief executive officer of the Associated General Contractors of America. “This administration can help address higher materials prices and broader market uncertainty by quickly finalizing remaining trade negotiations.”
Data related to producer price indexes can be accessed through government sources.