Construction worker writing at his work deskAssociated General Contractors of America’s (AGC) analysis showed that construction prices in the country increased in March, including materials that are subject to proposed tariffs.

The price hike may have involved construction supplies, such as steel sheets for sale. However, more engineering and construction companies will spend a bigger amount this year, according to a separate forecast.

Construction Materials

AGC chief economist Ken Simonson said that the price increase in the previous month occurred prior to the announcement of tariffs for steel and aluminum, among other imported items from China. As U.S. mills and the trucking industry encounter capacity constraints, AGC warned that projects may be delayed or even shelved if supplies become too expensive in the following months.

For instance, steel mill product prices increased 4.9% in March, while prices for aluminum mill shapes rose 11.4% in the same period. The good news, however, involves a higher spending this year on construction and engineering projects led by the residential sector and some commercial segments.

Higher Annual Spending

FMI Corporation said in its first-quarter outlook that spending among construction and engineering firms would increase by 7% this year, up from 4% in 2017. Housing improvements and single-family projects would lead the forecast growth with an increase of 12% and 7%, respectively, followed by a 9% increase in office developments.

Based on the forecast, water supply, sewage, and waste disposal are some of the underperforming sectors for the year.

Steel and aluminum tariffs in the U.S. may be a major reason for the increase in construction prices for March, but the outlook on construction spending remains favorable for contractors and suppliers. Still, industry leaders believe that regulatory reform and more funding for infrastructure projects would sustain the high demand for construction amid an expanding economy.