‘There is a limit’: Rising materials costs test construction’s breaking point

Core Insights - Tariff hikes are causing significant volatility in construction materials, leading to project delays and cancellations [3][4] - A substantial percentage of contractors are adjusting their pricing strategies in response to increased costs [5] - Overall construction input prices have risen, with specific increases in iron and steel costs impacting the market [6] Group 1: Market Conditions - The Associated General Contractors of America (AGC) indicates that there is a limit to how many price increases the market can absorb before project delays occur [3] - Approximately 43% of contractors reported that at least one project was canceled, postponed, or scaled back due to higher costs in the past six months [3][5] - Overall inputs to nonresidential construction are nearly 44% higher than in February 2020, despite flat growth recently [4] Group 2: Pricing Strategies - Two in five contractors have marked up their prices to offset tariffs, while others have procured materials earlier to mitigate future cost increases [5] - About 16% of contractors have absorbed the higher costs themselves or negotiated cost-sharing with suppliers [5] - Nearly 40% of contractors anticipate further increases in material prices in the coming months [5] Group 3: Price Trends - Construction input prices increased by 0.2% in August, primarily due to rising iron and steel costs [6] - Overall input prices are now 2.3% higher and nonresidential construction prices are 2.6% higher compared to the previous year [6] - The increase in prices would have been more significant if not for the decline in oil and natural gas prices [6]