The Associated General Contractors of America has reported a 0.5 percent rise in the price of materials and services used in nonresidential construction for February. This follows a 0.7 percent increase in January, based on an analysis of government data. The association’s officials expressed concerns that rising costs could hinder efforts to build a manufacturing base as intended by recent tariffs.
Ken Simonson, the association’s chief economist, stated, “It’s a bad sign that construction costs have been rising significantly even before most of the Trump administration’s tariffs have taken effect.” He further noted that with many tariffs now in place and more pending, construction costs are expected to continue increasing.
The producer price index for inputs to new nonresidential construction saw its second consecutive monthly rise. Conversely, the index for new nonresidential building construction—a measure reflecting contractor charges—decreased by 0.1 percent in February after a 0.3 percent rise in January. This discrepancy suggests contractors are struggling to pass increased costs onto clients, affecting profit margins.
Significant contributors to the rising input prices include metals such as steel mill products, which surged by 2.7 percent; copper and brass mill shapes rose by 1.8 percent; aluminum mill shapes increased by 1.0 percent; diesel fuel climbed by 2.3 percent; and lumber and plywood went up by 1.7 percent.
Simonson pointed out that these price assessments were made around February 11th, prior to additional tariffs imposed later on steel and aluminum imports from various countries including Mexico, Canada, and China.
Jeffrey Shoaf, CEO of the Associated General Contractors of America, highlighted potential unintended consequences: “The irony is that the tariffs’ impacts on construction costs might just price some manufacturers out of their decision to expand or add plants in the U.S.” Shoaf called for a resolution to underlying disputes causing these tariffs.
