Construction material prices continued their upward trajectory in March, marking the third consecutive month of significant increases. According to recent data, input costs have risen at an annualized rate of 9.7% in the first quarter of 2025, with analysts pointing to newly imposed tariffs as a key driver behind the accelerating inflation.
Tariffs Fuel Price Volatility, Disrupting Project Planning
The Associated General Contractors of America (AGC) warned that the uncertainty surrounding tariffs is complicating purchasing and budgeting decisions for builders and project owners. Suppliers preemptively issued a wave of price hike notifications in March—even before new tariffs took full effect—further destabilizing cost projections.
Ken Simonson, AGC’s chief economist, noted sharp increases in lumber and metals prices last month, while contractors reported receiving a flood of supplier notices announcing impending cost adjustments. “Rapid changes in trade policy threaten to push prices even higher for essential construction materials,” Simonson said.
Contractors Rush to Lock in Prices Amid Rising Costs
Facing escalating expenses, many contractors are accelerating procurement efforts to secure materials before additional price hikes take hold. Michael O’Reilly, vice president at construction consultancy Rider Levett Bucknall, said firms are proactively engaging in early procurement discussions to mitigate financial risks.
“The latest Producer Price Index (PPI) data reflects one of the steepest monthly increases we’ve seen in three years,” O’Reilly stated. “We’re advising clients to adjust contingency plans based on project timelines and exposure to volatile material costs.”
Sustained Inflation Could Delay or Cancel Projects
The current streak of monthly price hikes—the first since September 2023—has raised concerns about long-term project viability. Anirban Basu, an industry economist, cautioned that while construction demand remains strong, persistent cost escalation and market instability could lead to project delays or cancellations if the trend continues.
AGC has called on federal policymakers to reassess new tariffs, at least until the full impact of existing trade measures becomes clearer. “Our members strive to deliver maximum value to clients, but that becomes impossible when material costs fluctuate unpredictably,” said AGC CEO Jeffrey Shoaf.
As the industry braces for further disruptions, contractors and developers are being forced to adapt quickly—whether through accelerated purchasing, revised budgeting, or contingency planning—to navigate an increasingly volatile market.
