The Producer Price Index released by the US Bureau of Labor Statistics showed that total construction material prices rose 1.2% in August. Year-over-year prices increased 8.8%, with materials for non-residential construction seeing a similar trend.

Some key construction materials have seen an almost 10% year-over-year surge, including switchgear, iron, steel, softwood lumber, copper wire, and derivative metal products. Metal and petroleum products have posted some of the steepest price increases. 

Associated General Contractors of America reported that 55% of contractors have abandoned or delayed projects in the last six months, with one-third attributing the disruptions to rising costs. AGC chief economist Ken Simmons explains, “Those cost increases, according to our latest survey, are a major reason project owners are canceling, postponing, or scaling back projects.

“As firms pay more to address labor shortages and materials prices continue to climb, they are caught between pricing themselves out of the market or performing work at a loss, CEO of AGC Jeffrey D. Shoaf said in a statement. 

The war in Iran, the trade war with Canada, and petrol prices near $100 per barrel (34.9% increase since August 2025) have all contributed to inflation in construction materials. 

The Labor Department said the consumer price index rose 3.4% last month compared with the same period a year earlier. Inflation rates have been increasing rapidly, with costs jumping 0.4% from July to August. This, in turn, puts pressure on the Federal Reserve to hike the benchmark interest rate, which could affect mortgage and auto loan costs. 

With mid-term elections round the corner, the Trump administration is looking to win back voter confidence with promises of a $5,000 payment to every American adult if the GOP keeps a majority in Congress. 

Many economists expect a rate hike at the Fed’s next meeting on September 15-16.