Construction contractors entering the peak summer building season are facing the most sustained materials cost escalation since 2022. Two separate analyses released in May 2026 — one from the Associated General Contractors of America (AGC) and one from the Associated Builders and Contractors (ABC) — paint a consistent picture: input costs are rising faster than contractors can absorb through their bid prices, and the widening gap is putting project budgets and timelines at risk.

The April 2026 Numbers

According to the AGC's analysis of Bureau of Labor Statistics producer price index data, inputs to new nonresidential construction rose 1.7% in April 2026 alone and 6.6% compared to April 2025 — the largest year-over-year increase since December 2022. The AGC reported that the PPI for new nonresidential building construction — a measure of what contractors say they would charge to build a fixed set of buildings — rose just 3.6% over the same period. The gap between what contractors pay and what they can charge is now material.

ABC's parallel analysis, cited by Construction Dive, found that construction input prices are up 6.2% year to date through April 2026, more than the roughly 4.8% total growth recorded over the prior three years combined.

What Is Driving the Surge

The April acceleration was broad-based but concentrated in two categories: energy-related inputs and tariff-sensitive metals.

Energy

Energy-related materials posted the most dramatic increases in April, according to the AGC:

• Diesel fuel: up 13.6% in April and 73.8% higher than one year ago
• Asphalt: up 41.0% in a single month and 18.0% year over year
• Crude petroleum: up 11.3% month over month (per ABC analysis)
• Unprocessed energy materials: up 9.2% month over month
• Truck freight transportation: up 8.1% in April and 15.2% year over year — adding to delivered cost on every project

Metals

Tariff-driven metals costs continued compounding in April. The AGC's data showed:

• Aluminum mill shapes: up 37.3% year over year
• Copper and brass mill shapes: up 20.9% year over year
• Steel mill products: up 13.3% year over year
• Fabricated structural metal, bar joists, and rebar: up 13.6% year over year
• Construction machinery and equipment: up 4.0% year over year

The Margin Squeeze Problem

The core issue for contractors is not just that costs are high — it is that they are rising significantly faster than market bid prices allow for. Macrina Wilkins, director of market insights for the AGC, stated: "Construction input costs continue to rise much faster than contractors' bid prices, particularly for energy-intensive and metals-related materials. That gap is making it increasingly difficult for contractors to accurately price projects and raising the risk of delays, redesigns, and deferred construction activity if cost volatility persists." [AGC]

Anirban Basu, ABC's chief economist, put the year-to-date figure in sharp context: "Input prices have now risen more during the first four months of 2026 than over the prior three years." He added that "while contractors remain busy … these cost pressures will likely weigh on construction activity over the coming months." [Construction Dive]

Basu also noted that the inflation data, combined with a healthy labor market, makes Federal Reserve rate cuts unlikely this year — eliminating a potential offset to elevated borrowing costs for developers and owners.

The Gas Tax Holiday Question

As policymakers have floated a federal gas tax holiday as a potential relief measure, Jeffrey D. Shoaf, CEO of the AGC, pushed back directly: "A gas tax holiday may sound appealing politically, but it will not meaningfully reduce diesel or transportation costs for contractors and is unlikely to deliver significant savings to consumers. At the same time, suspending the gas tax would weaken the user-funded infrastructure program that supports the roads, bridges, and transportation systems the economy depends on." [AGC]

Why It Matters to Construction Professionals

The April 2026 data arrives as contractors across the nonresidential sector are managing large backlogs while simultaneously absorbing cost increases that outpace the bids they submitted months or years earlier. For fixed-price contracts bid in 2024 or early 2025, the cumulative inflation since project award can be substantial. The energy cost surge — particularly the 73.8% year-over-year jump in diesel — affects not just direct fuel consumption but delivered material costs, equipment operation, and logistics on every active project nationwide.

Implications for Owners, Developers, and Contractors

• Owners and developers: Expect escalation clauses and cost-plus fee structures to become more common in owner-contractor negotiations. Projects in planning or pre-bid phases should build contingency reserves that reflect the current rate of input cost growth.
• General contractors: Locking in materials pricing — particularly for structural steel, aluminum systems, copper electrical components, and asphalt — early in the procurement process limits exposure on fixed-price work. Unit-price escalation language in subcontracts deserves fresh attention.
• Subcontractors: Trades with heavy energy or metals content — mechanical, electrical, roofing, sitework, concrete — are facing the steepest input cost exposure. Bid validity periods may need to shorten as volatility persists.
• Public agency owners: Capital project budgets developed before 2025 may no longer reflect realistic construction costs. The AGC and ABC data provide objective benchmarks for budget amendments and change order evaluations.

What to Watch Next

• May 2026 PPI data, due mid-June, will indicate whether energy cost escalation is moderating or broadening further
• Tariff policy developments affecting steel and aluminum imports, which remain the primary structural driver of metals price increases
• Federal Reserve meeting signals regarding rate policy, which Basu indicated is unlikely to pivot toward cuts given current inflation trajectory
• ABC's Construction Confidence Index and AGC's Backlog Indicator in June for leading indicators of whether high input costs are beginning to slow new project starts

Bottom Line

Construction input costs rose 6.6% year over year in April 2026 — their largest annual increase in more than three years — while bid prices have risen only half as much. The gap is not academic: it directly compresses contractor margins, complicates project pricing, and creates pressure toward redesigns and deferrals on cost-sensitive work. With energy, metals, and freight all moving sharply higher simultaneously, the industry enters the peak 2026 construction season managing the most challenging cost environment since the post-pandemic inflation peak.

Sources:

• AGC: Surging Materials and Energy Costs Drive Construction Input Prices Sharply Higher in April
• Construction Dive: Construction prices 'surged' in April, up 6.2% year to date
• AGC News: Full analysis release