The number is uncomfortable.
Construction input prices rose 1.7% in April and are up 6.2% for the first four months of 2026, according to the Associated Builders and Contractors’ analysis of Bureau of Labor Statistics producer price index data released this week. Year-to-date inflation already exceeds the prior three years combined, which totaled 4.8%. ABC chief economist Anirban Basu called the run “too hot” for the Fed to cut rates in 2026.
For contractors, the deeper problem isn’t the headline. It’s the composition.
Where the Pain Is Concentrated
Energy and metals carried most of April’s escalation. Crude petroleum prices jumped 11.3% month over month. Unprocessed energy materials rose 9.2%. Steel mill products are up 20.7% year over year, and fabricated structural metal, bar joists, and rebar are up 16.6% — all categories that sit at the front of nearly every nonresidential bill of materials.
The producer price index for aluminum mill shapes, hit with a 50% tariff in the latest round, ran 33% above year-ago levels as of February and hasn’t relented. That’s the largest annual increase since the 2022 supply-chain disruption.
Tariff-exposed line items are doing the heaviest lifting in the inflation print. Material categories outside the tariff fence — engineered wood, ready-mix concrete, gypsum — are growing roughly in line with broader inflation. The bifurcation matters because it means the cost pressure is concentrated in the structural and envelope packages contractors quote earliest in a project.
Bid Margins Are Absorbing What Owners Won’t
Here’s the awkward gap. The PPI for new construction — what contractors actually charge — rose less than 4.3% year over year. Input prices rose 7% over the same period. That spread is the bid sheet absorbing more risk than the contract price covers.
Some of that is escalation clauses on backlogged projects that priced before the latest tariff round. Some is competitive bidding in markets where contractors are reluctant to lose work. The result, either way, is profit compression. ABC’s quarterly contractor confidence index slipped on profit-margin expectations even as the backlog index hit a 10-month high in April. Contractors are getting more work and making less per job. Our recent backlog coverage walks through that dynamic in more detail.
Where the Cycle Is Heading
A few things to watch through the summer.
First, whether the rate-cut path closes entirely. Basu and most of the major construction economists now assume the Fed holds through 2026. That changes the math on private commercial starts, particularly speculative office and retail, both of which were starting to thaw.
Second, whether contractors can renegotiate. The shift toward time and materials contracting that Construction Dive flagged this month is one signal. Another is the growing number of construction contracts now including iron, steel, and aluminum-specific escalation provisions — language that didn’t exist in standard AIA templates two years ago.
Third, data center demand. ABC’s backlog data shows nonresidential momentum is now largely a data center story. Strip data center starts out and the broader market looks closer to flat. That concentration is a risk if hyperscaler capex slows, even slightly.
For now, contractors quoting through the summer should assume continued input volatility, build aluminum and steel escalation clauses into every contract that touches a curtain wall or structural package, and price energy-exposed materials with a wider band than 2025 norms suggest.