Higher material prices and easing contractor sentiment point to tighter budgets heading into 2026
Washington, D.C., 26 November 2025 – New data from the Producer Price Index shows that U.S. construction input prices increased 3.5 percent in October compared with the same month last year, according to an analysis from Associated Builders and Contractors. The rise was led by steady cost increases in concrete products, electrical equipment, and several steel categories, suggesting contractors may face continued pricing pressure as they plan bids and procurement for 2026.
Prices also moved slightly higher from September, extending a slow upward trend that persisted during the federal government shutdown period. ABC noted that the higher cost environment comes at the same time that key indicators in its member surveys are weakening, signaling a more cautious market outlook.
Ahead of the government reopening, ABC reported that its Construction Backlog Indicator slipped to 8.4 months in October, down from 8.5 months the month before and the lowest point since May. The sharpest decline occurred among smaller contractors, whose backlog dropped to 5.8 months. Meanwhile, heavy industrial backlog climbed to 8.8 months, and infrastructure work rose to 9.8 months, highlighting differences across project types.
ABC’s Construction Confidence Index also eased in October. Expectations for profit margins and staffing declined, while sales expectations stayed steady. All three indicators remain above 50, meaning contractors still anticipate growth over the next six months, but at a slower pace. Survey insights also show that firms active in data center construction continue to report much stronger pipelines than those outside the sector.
The latest pricing trends suggest construction inflation remains sticky, even as overall U.S. inflation continues to fall from its highs in 2022. Rising materials costs paired with softer backlog and margin expectations indicate ongoing pressure on project budgets, especially in commercial and institutional markets that have not yet shown strong recovery this year.
Contractors involved in industrial megaprojects and large data center developments remain the most insulated from cost escalation and cooling demand. Companies focused on smaller commercial projects or public-building work appear more exposed to tighter bidding conditions, increased competition, and longer timelines through early 2026.
