U.S. construction input costs climbed 7.4% year over year in July, with further increases expected

U.S. construction input prices rose 7.4% year over year in July 2026, ticking up just 0.1% from June, according to Associated Builders and Contractors' analysis of U.S. Bureau of Labor Statistics Producer Price Index data published 13 August 2026^[1]. Nonresidential construction input prices followed a near-identical path, rising 0.1% month over month and 7.2% above their July 2025 level.

What held the monthly number down

A sharp drop in energy costs at the start of July masked the underlying pressure. Crude petroleum prices fell 11.9% and unprocessed energy materials declined 7.4% in July, providing a brief cushion. Natural gas moved the other way, rising 10.4% over the same period.

The calm did not last. "Construction input prices were virtually unchanged in July, but that relatively tame behavior can be traced to the dip in fuel prices that occurred at the start of the month," said Anirban Basu, ABC chief economist. Diesel fuel prices surged more than $0.50 per gallon from the week the index was measured through the end of July, erasing much of that relief before the month closed.

Tariffs are amplifying structural materials pressure

Beyond energy, tariff-driven cost increases are running through several key categories. The Associated General Contractors of America, in its own reading of the BLS data, flagged tariffs on metals - particularly aluminum mill shapes and copper - as a direct source of escalation^[1]. Lumber and plywood also increased at their fastest rate in years, according to AGC.

Ken Simonson, AGC chief economist, put it plainly: "Construction firms are being hit with outsized cost increases for a host of materials and also labor."^[1]

The materials under the most pressure include:

• Lumber and plywood - rising at the fastest pace in years, per AGC
• Iron and steel - up sharply, with tariff exposure on mill products and fabricated structural steel
• Copper - elevated by both tariff pass-through and sustained demand from data center and electrification work
• Natural gas - up 10.4% in July alone, adding to energy-intensive process costs

The outlook for the second half of 2026

Basu warned that the July lull is unlikely to hold. "Given the subsequent rebound in oil prices and ongoing increases in certain materials prices, such as lumber and iron and steel, materials prices will almost certainly continue to climb in the months to come."^[1]

AGC added a broader concern: elevated construction costs could eventually stifle project activity altogether, particularly if tariff relief does not materialise and federal funding for highway and transit programmes remains constrained^[1].

The next BLS Producer Price Index release, covering August 2026, is scheduled for 10 September 2026. With diesel already recovering and tariff-exposed commodities still climbing, that report will be the first real test of whether July's muted monthly reading was a pause or a turning point.