ABC report shows higher construction input costs and weakening contractor confidence in October as backlog hits lowest level since May
U.S. construction input prices rose 3.5% in October compared with a year earlier, based on new Producer Price Index data from the U.S. Bureau of Labor Statistics analyzed by Associated Builders and Contractors.
ABC said the increase was driven by sustained year-over-year gains in categories such as concrete products, electrical equipment, and several steel inputs, adding that continued cost pressure is expected as contractors prepare 2026 bids and procurement schedules.
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Materials prices also ticked higher from September, extending an uneven upward trend that persisted through the federal government shutdown period. ABC noted that the elevated cost environment coincides with weakening indicators in its latest survey data.
Ahead of the federal government reopening, ABC reported on Nov. 11 that its Construction Backlog Indicator slipped to 8.4 months in October, down from 8.5 months in September and the lowest level since May.
The decline was concentrated among the smallest firms in the survey, whose backlog fell sharply to 5.8 months, while heavy industrial backlog increased to 8.8 months and infrastructure backlog rose to 9.8 months.
Sentiment Softens as Inflation Stays Sticky
ABC’s Construction Confidence Index also weakened in October. Profit margin and staffing expectations declined, while sales expectations held steady. All three readings remain above 50, indicating contractors still anticipate growth over the next six months, but at a slower pace.
“Nearly 65% of contractors indicated that they think the U.S. construction industry is contracting,” ABC Chief Economist Anirban Basu said in the Nov. 11 release.
He added that 23% of contractors expect sales to decline over the next six months—the highest share in more than a year—and that firms working on data centers continue to report notably stronger backlog than those that are not.
The latest price data indicate construction inflation remains sticky even as overall U.S. inflation has cooled from its 2022 peak.
Elevated materials costs, combined with weakening backlog and softening margin expectations, suggest continued pressure on project budgets, especially in commercial and institutional markets that have shown little rebound this year.
Contractors active in industrial megaprojects and data centers continue to show the strongest pipelines. Firms tied to smaller commercial projects and public-sector building work remain the most exposed to prolonged cost escalation, tighter demand and potentially more competitive bidding through early 2026.
