“Construction materials prices continued to increase at a faster-than-ideal pace in May,” said ABC Chief Economist Anirban Basu. “While input prices are up just 1.3% over the past year, that modest escalation is entirely due to price decreases during the second half of 2024. Costs have increased rapidly since the start of this year, with input prices rising at a 6% annualized rate through the first five months of 2025."

Basu said the recent doubling of Section 232 tariffs on steel and aluminum has not yet been felt in the May data and prices may increase more as contractors deal with the new 50% tariff rate on imports of steel and aluminum. The rate on the two metals was 25% previously.

“Accelerating input price escalation is largely due to rapid price increases for tariff-affected goods like iron and steel,” said Basu. “Expect this dynamic to remain over the next few quarters; these data predate tariffs on iron and steel rising from 25% to 50%, which went into effect on June 4."

Despite rising input prices, contractors remain relatively optimistic about their profit margins, according to ABC’s Construction Confidence Index. Basu said there was cooler-than-expected economy-wide inflation in May and the number of expected rate cuts in 2025 has risen, according to ABC's calculus.

"If those expectations are realized, it would provide the construction industry with a much-needed tailwind," he said.