Construction input prices increased 0.4% in July compared to the previous month, while nonresidential construction input prices also increased 0.4% for the monthaccording to U.S. Bureau of Labor Statistics’ Producer Price Index data released Thursday.

According to an analysis from the Associated Builders and Contractors, overall construction input prices are 2.2% higher than a year ago, while nonresidential construction input prices are 2.6% higher. In June, construction input prices increased 0.2% compared to the previous month, and nonresidential construction input prices increased 0.3% for the month.

“Construction materials prices continued to increase too quickly in July,” said ABC Chief Economist Anirban Basu. “Nonresidential input prices have risen at a 5.8% annualized rate since January, and trade policy will likely continue to put upward pressure on materials prices over the next several months."

New and previously announced tariff policies went into effect on Aug. 7, which could mean additional price increases may occur in the coming months. Among the tariff policies affecting construction the most are the 50% tariffs on all steel and aluminum as well as a 50% tariff on copper imports that went into effect Aug. 1.

"Copper wire and cable prices, for instance, surged 5% in July and are now up 12.2% over the past year," Basu said. "While contractors remain relatively upbeat, according to ABC’s Construction Confidence Index, input price escalation may diminish profit margins during the final months of the year."

Prices increased in two of the three energy categories last month. Crude petroleum and unprocessed energy materials prices were up 1.7% and 0.5%, respectively, while natural gas prices decreased 2.1% in July.

In July, prices for wholesalers rose at the fastest pace in three years, according to the BLS data. The Producer Price Index rose 0.9% in July, the largest since June 2022. According to the National Home Builders Association, tariffs on building materials don't directly appear in PPI data because the PPI measures prices for domestically produced goods and services. Tariffs and taxes are explicitly excluded from the PPI. However, price changes in reaction to tariffs are included.

Graph courtesy of the Bureau of Labor Statistics

On an unadjusted basis, the index for final demand advanced 3.3% for the 12 months ended in July, the largest 12-month increase since rising 3.4% in February 2025, the BLS reported.

These could be warning signs that inflation will flare up once more.

“The rapid increase in broader producer prices in July is just as worrying as rising construction input costs,” said Basu. “With prices for final demand goods and services rising at the fastest pace since March 2022, the Federal Reserve will have to consider the prospect of resurgent inflation when deciding whether or not to cut rates at its September meeting.

"The construction industry is in desperate need of lower borrowing costs, and higher rates for longer would continue to weigh on construction spending.” 

JP Morgan economists estimate U.S. consumers are paying about a third of the tariffs that were previously enacted. A report from the Yale Budget Lab says household purchasing power will be reduced by an average of $2,400 in 2025, settling to $2,000 per household.

“Our updated estimate of the average effective U.S. tariff rate stands at 15.8% — a significant increase from the 2.3% rate at the end of 2024, but roughly six percentage points lower than the 22% recorded on Liberation Day,” said Nora Szentivanyi, senior global economist at J.P. Morgan, on the company's website Aug. 1. “Based on our expectation that sectoral tariffs will be imposed later this year, we still anticipate that the U.S. effective tariff rate will approach 18–20%, while the observed tariff rate (based on actual customs duties) is likely to level off slightly higher than 15%.”