Construction costs climbed again in March, with increases for a wide range of building materials, including many that are subject to proposed tariffs that could drive prices still higher and cause scarcities, according to an analysis by the Associated General Contractors of America of Labor Department data released today. Association officials warned that tariffs on some items might lead to project delays and cancellations if supplies become unobtainable or too expensive for current budgets.
"Prices increased for many items in March, even before tariffs announced for steel, aluminum and many items imported from China have taken effect," said the association's chief economist, Ken Simonson. "Steel service centers and other suppliers are warning there is not enough capacity at U.S. mills or in the trucking industry to deliver orders on a timely basis. Thus, contractors are likely to experience still higher prices as well as delivery delays in coming months."
The producer price index for inputs to construction industries, goods—a measure of all materials used in construction projects including items consumed by contractors, such as diesel fuel—rose 0.8% in March alone and 5.8% over 12 months. The year-over-year increase was the steepest since 2011, the economist noted.
"Many items contributed to the latest round of increases," Simonson observed. "Moreover, today's report only reflects prices charged as of mid-March. Since then, some tariffs have taken effect, many others have been proposed, and producers of steel and concrete have implemented or announced substantial additional increases."
From March 2017 to March 2018, the producer price index jumped by 13.7% for lumber and plywood, 11.4% for aluminum mill shapes, and 4.9% for steel mill products. The U.S. has been in a dispute with Canada over lumber imports, has imposed tariffs on several types of steel and has announced or recently imposed additional tariffs—not reflected in the March price index—on steel, aluminum and numerous Chinese construction products.
Other construction inputs that rose sharply in price from March 2017 to March 2018 include diesel fuel, 39.7%; copper and brass mill shapes, 11.2%; gypsum products, 8.4%; and plastic construction products, 5.8%. In addition, concrete and other suppliers announced significant price hikes that were due to take effect in April.
Construction officials said the tariffs that have been announced have already triggered a surge of orders that mills say they cannot fill on a timely basis, which will create budget problems, delays and possibly cancellations for infrastructure and other public projects. They said adequate funding of infrastructure would be a better way to foster demand for domestic steel and aluminum without harming contractors.
"Tariffs will harm contractors that are currently working on projects for which they have not bought materials and will disrupt budgets for future construction," said Stephen E. Sandherr, the association's chief executive officer. "The best way to help the U.S. steel and aluminum sector is to continue pushing measures, like regulatory reform and new infrastructure funding, that will boost demand for their products as the economy expands."
View producer price indexes for construction.
Related Stories
Market Data | Sep 18, 2020
6 must reads for the AEC industry today: September 18, 2020
Sagrada Familia completion date pushed back and energy code appeals could hamper efficiency progress.
Market Data | Sep 17, 2020
6 must reads for the AEC industry today: September 17, 2020
Foster + Partners-designed hospital begins construction in Cairo and heat pumps are the future for hot water.
Market Data | Sep 16, 2020
6 must reads for the AEC industry today: September 16, 2020
REI sells unused HQ building and Adjaye Associates will design The Africa Institute.
Market Data | Sep 15, 2020
7 must reads for the AEC industry today: September 15, 2020
Energy efficiency considerations for operating buildings during a pandemic and is there really a glass box paradox?
Market Data | Sep 14, 2020
6 must reads for the AEC industry today: September 14, 2020
63% of New York's restaurants could be gone by 2021 and new weapons in the apartment amenities arms race.
Market Data | Sep 11, 2020
5 must reads for the AEC industry today: September 11, 2020
Des Moines University begins construction on new campus and the role of urgent care in easing the oncology journey.
Market Data | Sep 10, 2020
6 must reads for the AEC industry today: September 10, 2020
Taipei's new Performance Hall and Burger King's touchless restaurant designs.
Market Data | Sep 9, 2020
6 must reads for the AEC industry today: September 9, 2020
What will the 'new normal' look like and the AIA hands out its Twenty-five Year Award.
Market Data | Sep 8, 2020
‘New normal’: IAQ, touchless, and higher energy bills?
Not since 9/11 has a single event so severely rocked the foundation of the commercial building industry.
Market Data | Sep 8, 2020
7 must reads for the AEC industry today: September 8, 2020
Google proposes 40-acre redevelopment plan and office buildings should be an essential part of their communities.