Construction Input Prices Putting Pressure On Contractors
Arlington, VA - The price of materials and services used in nonresidential construction jumped
1.1 percent from May to June, outpacing the rise in contractors’ bid prices, according
to an analysis by the Associated General Contractors of America of
recently released government data. Association officials warned that rising materials
prices were having an adverse impact on a growing number of construction projects
that have suddenly become more expensive.
“Some materials prices have fallen recently but others appear headed for further
increases,” said Ken Simonson, the association’s chief economist. “Since
these prices were collected, producers of gypsum, concrete, and other products
have announced or implemented new increases. In addition, the supply chain remains
fragile and persistent difficulties filling job openings mean construction costs
are likely to remain elevated despite declines in some prices.”
The producer price index for inputs to nonresidential construction--the
prices charged by goods producers and service providers such as distributors and
transportation firms—jumped 1.1 percent from May to June and 16.8 percent since
June 2021. Meanwhile, the index for new nonresidential building construction—a
measure of what contractors calculate they would charge to erect five types of
nonresidential buildings—climbed by 0.5 percent from May to June and 19.8 percent over 12 months.
A diverse mix of inputs accounted for the increase in the cost
index even as prices for several metal and wood products declined, the economist
added. The price index for diesel fuel soared 14.1 percent in June and more than
doubled over 12 months, rising 111.1 percent since June 2021. The index for asphalt
and tar roofing and siding products rose 3.2 percent in June and 22.2 percent
over 12 months. The index for plastic construction products rose 1.5 percent for
the month and 27.0 percent since June 2021. Insulation materials climbed 1.2 percent
in price last month and 16.0 percent year-over-year. The index for concrete products
rose 1.7 percent in June and 13.5 percent over 12 months. The index for paving
mixtures and blocks increased 2.9 percent in June and 17.9 percent over the past year.
These increases more than offset declines in indexes for metals
and lumber. There were one-month decreases in June in the index for copper and
brass mill shapes, -1.6 percent; steel mill products, -1.8 percent; aluminum mill
shapes, -5.2 percent; and lumber and plywood, -14.7 percent.
Association officials said public officials had a vested interest
in taking steps to address rising materials prices, noting those price increases
are making it more expensive to build all manner of public infrastructure projects.
They urged the Biden administration to remove remaining tariffs on a range of
construction materials and for public officials at all levels to take steps to
help unclog backed up supply chains.
“The
more materials prices increase, the harder it will be for public officials to
build new schools, roads and other infrastructure,” said Stephen E. Sandherr,
the association’s chief executive officer. “Taking steps to address rising
materials prices will help construction employers and taxpayers alike.”
View producer price index data.
About The Associated General Contractors Of America
The Associated General Contractors of America (AGC) is a leading association for the construction industry. AGC represents more than 26,000 firms, including over 6,500 of America’s leading general contractors, and over 9,000 specialty-contracting firms. More than 10,500 service providers and suppliers are also associated with AGC, all through a nationwide network of chapters. To learn more, visit www.agc.org.