Rising construction materials prices appear to be starting to drive up the price of construction projects, according to an analysis by the Associated General Contractors of America of government data released today. Association officials noted that despite a big jump in what contractors charge for projects, the rise in materials prices is still much higher.
“After being battered by unprecedented price increases for many materials, contractors are finally passing along more of their costs,” said Ken Simonson, the association’s chief economist. “Meanwhile, supply-chain bottlenecks and labor shortages continue to impede contractors’ ability to finish projects.”
The producer price index for new nonresidential construction—a measure of what contractors say they would charge to erect five types of nonresidential buildings—jumped 7.1% from September to October and 12.6% over the past 12 months. But an index of input prices—the prices that goods producers and service providers such as distributors and transportation firms charged for inputs for nonresidential construction—climbed by an even steeper 21.1% compared to October 2020, including a 1.3% increase since September, Simonson noted.
Many products, as well as trucking services, contributed to the extreme runup in construction costs, Simonson observed. The price index for steel mill products more than doubled, soaring nearly 142% since October 2020. The indexes for both aluminum mill shapes and copper and brass mill shapes jumped more than 37% over 12 months, while the index for plastic construction products rose more than 30%. The index for gypsum products such as wallboard climbed 25% and insulation costs increased 17%. Trucking costs climbed 16.3%. The index for diesel fuel, which contractors buy directly for their own vehicles and off-road equipment and also indirectly through surcharges on deliveries of materials and equipment, doubled over the year.
Association officials urged the Biden administration and Congress to do more to address supply chain backups that are crippling construction firms and the broader economy. These measures include additional tariff relief for key construction materials. They also urged federal officials to explore other options, like waiving hours of service rules so shippers can tackle freight backlogs.
“Supply chain backlogs are clearly one of the biggest threats to the economy recovery,” said Stephen E. Sandherr, the association’s chief executive officer. “Washington officials need to be more aggressive in taking steps to get key materials moving again so construction firms can continue rebuilding the country.”
View producer price index data. View chart of gap between input costs and bid prices. View the association’s Construction Inflation Alert.
Related Stories
Building Technology | Apr 11, 2016
A nascent commercial wireless sensor market is poised to ascend in the next decade
Europe and Asia will propel that growth, according to a new report from Navigant.
Industry Research | Apr 7, 2016
CBRE provides latest insight into healthcare real estate investors’ strategies
Survey respondents are targeting smaller acquisitions, at a time when market cap rates are narrowing for different product types.
Market Data | Apr 4, 2016
ABC: Nonresidential spending slip in February no cause for alarm
Spending in the nonresidential sector totaled $690.3 billion on a seasonally adjusted, annualized basis in February. The figure is a step back but still significantly higher than one year ago.
Market Data | Mar 30, 2016
10 trends for commercial real estate: JLL report
The report looks at global threats and opportunities, and how CRE firms are managing their expectations for growth.
Market Data | Mar 23, 2016
AIA: Modest expansion for Architecture Billings Index
Business conditions softening most in Midwest in recent months.
Retail Centers | Mar 16, 2016
Food and technology will help tomorrow’s malls survive, says CallisonRTKL
CallisonRTKL foresees future retail centers as hubs with live/work/play components.
Market Data | Mar 6, 2016
Real estate execs measure success by how well they manage ‘talent,’ costs, and growth
A new CBRE survey finds more companies leaning toward “smarter” workspaces.
Market Data | Mar 1, 2016
ABC: Nonresidential spending regains momentum in January
Nonresidential construction spending expanded 2.5% on a monthly basis and 12.3% on a yearly basis, totaling $701.9 billion. Spending increased in January in 10 of 16 nonresidential construction sectors.
Market Data | Mar 1, 2016
Leopardo releases 2016 Construction Economics Report
This year’s report shows that spending in 2015 reached the highest level since the Great Recession. Total spending on U.S. construction grew 10.5% to $1.1 trillion, the largest year-over-year gain since 2007.
Market Data | Feb 26, 2016
JLL upbeat about construction through 2016
Its latest report cautions about ongoing cost increases related to finding skilled laborers.