{"id":817319,"date":"2026-08-18T05:26:16","date_gmt":"2026-08-18T05:26:16","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/817319\/"},"modified":"2026-08-18T05:26:16","modified_gmt":"2026-08-18T05:26:16","slug":"construction-inflation-for-nonresidential-buildings-soars-amid-ai-investment-mania","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/817319\/","title":{"rendered":"Construction Inflation for Nonresidential Buildings Soars amid AI Investment Mania"},"content":{"rendered":"

\t\t The massive piles of dollars getting thrown at AI infrastructure have an effect.
\nBy\u00a0Wolf Richter<\/a>\u00a0for\u00a0WOLF STREET<\/a>.<\/p>\n

Construction of AI data centers, and the infrastructure needed to supply them with power, has turned into a mad scramble, and spending is exploding at an exponential rate<\/a>. Huge amounts of money are being thrown around to get these projects done, equipped, and hooked up amid shortages of all kinds, including labor shortages, such as electricians.<\/p>\n

And construction costs for nonresidential buildings in general are surging. The Producer Price Index (PPI) for nonresidential construction services spiked by 7.4% year-over-year in July. And the PPI for construction materials \u2013 steel mill products, concrete, lumber, gypsum, etc. \u2013 spiked by 10.5% year-over-year, according to PPI data released<\/a> by the Bureau of Labor Statistics.<\/p>\n

The PPI for nonresidential construction services began spiking in March this year, and over the past five months has spiked by a cumulative 5.1%. Compared to a year ago, it jumped by 7.4%. The year-over-year increases in June and July were the highest since July 2022.<\/p>\n

\"\"<\/p>\n

The index tracks domestic prices that one company pays to another company for trade services, transportation, warehousing, architectural engineering, legal services, equipment leasing, etc.<\/p>\n

It excludes direct labor costs on construction sites, capital investment (such as purchases of heavy equipment), and imports.<\/p>\n

Since January 2021, the PPI for nonresidential construction services has soared by 31%. Since January 2020, it has soared by 44%.<\/p>\n

This chart shows the price level of the index, not the percentage change. It shows how the price surge over the past 12 months came on top of already very high prices for those services.<\/p>\n

\"\"<\/p>\n

The PPI for construction materials \u2013 steel mill products, concrete, lumber, gypsum, etc. \u2013 spiked by 10.5% year-over-year, the biggest increase since June 2022. The index tracks the change in selling prices that companies charge each other.<\/p>\n

Commercial contracts frequently include contract escalation clauses that cite this index to adjust project budgets based on real-world raw material inflation.<\/p>\n

\"\"<\/p>\n

Steel joists and rebar, for example: At the product category level, the PPI for \u201cFabricated Structural Metal Bar Joists and Concrete Reinforcing Bars\u201d spiked by 17.7% year-over-year. It\u2019s part of the PPI for construction materials.<\/p>\n

\"\"<\/a><\/p>\n

Since the beginning of 2025, over those 19 months, the PPI for construction materials spiked by 15%. Since January 2021, it spiked by 46%. Since January 2020, it spiked by 58%.<\/p>\n

This chart shows the price level of the index. The 15% price surge over the past 19 months came on top of already very high prices for those materials.<\/p>\n

\"\"<\/p>\n

The PPI for nonresidential building construction \u2013 tracks total put-in-place building costs including direct labor, materials, site equipment, services, and contractor overhead \u2013 jumped by 5.2% year-over-year.<\/p>\n

\"\"<\/p>\n

The 5.2% increase over the past 12 months comes on top of already very high prices. Since the beginning of 2021, the index has soared by 45%, despite the breather in 2023 and 2024, after the massive spike in 2021 and 2022.<\/p>\n

\"\"<\/p>\n

These soaring construction costs are only part of how the massive piles of dollars that are being tossed around as investment in AI infrastructure create inflation across various sectors of the economy.<\/p>\n

The PPI doesn\u2019t isolate data centers. These are construction costs for nonresidential buildings in general. The construction boom surrounding semiconductor plants that started in 2022 has had a similar effect. And the construction booms for data centers and semiconductor plants are linked, amid efforts to shift some of the AI-related chip production to the US, and those chip plants are being built.<\/p>\n

\u00a0<\/p>\n

Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the mug to find out how:<\/p>\n

\n\"\"<\/a>\n<\/p>\n

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