The cost of goods and services used in construction climbed by a record-setting 4.3% in May and 24.3% over the past 12 months, jeopardizing contractors’ solvency and construction workers’ employment, according to an analysis by the Associated General Contractors of America of government data released today. Association officials urged the Biden administration to move more quickly to end tariffs and quotas that are adding to construction materials costs and availability problems.
“The increase in producer prices for construction materials over the past year far outstrips contractors’ ability to charge more for projects,” said Ken Simonson, the association’s chief economist. “That gap means contractors are being hit with huge costs that they did not anticipate and cannot pass on.”
The 24.3% increase in prices for materials used in construction from May 2020 to last month was nearly twice as great as in any previous year, Simonson said. Meanwhile, the producer price index for new nonresidential construction—a measure of what contractors say they would charge to erect five types of nonresidential buildings—rose only 2.8% over the past 12 months, as contractors held their profit expectations down in order to compete for a limited number of new projects.
Items with especially steep price increases over the past year covered a wide range of materials, including products made from wood, metals, plastics, and gypsum. The producer price index for lumber and plywood more than doubled—rocketing 111% from May 2020 to last month. The index for steel mill products climbed 75.6%, while the index for copper and brass mill shapes rose 60.4% and the index for aluminum mill shapes increased 28.6%. The index for plastic construction products rose 17.5%. The index for gypsum products such as wallboard climbed 14.1%. Fuel costs, which contractors pay directly to operate their own trucks and off-road equipment, as well as through surcharges on freight deliveries, have also jumped.
Association officials said the Biden administration can provide immediate relief from some of the price pressures by ending tariffs on Canadian lumber, along with tariffs and quotas on steel and aluminum from numerous countries. Officials said the administration took a first step today by announcing agreement on a working group with the European Union that will aim to end to tariffs on steel and aluminum from the EU by the end of 2021 but that much more tariff relief is needed, and sooner. The administration should also end the duty on Canadian softwood lumber, instead of doubling the rate, as the Commerce Department has proposed, the officials added.
“The administration is right to recognize that ending tariffs on our allies is good policy,” said Stephen E. Sandherr, the association’s chief executive officer. “But there is no reason to wait six months to adopt good measures. The president should go further, by ending tariffs and quotas on steel and aluminum from other trading partners as well as the European Union.”
View producer price index data. View chart of gap between input costs and bid prices.
Related Stories
Multifamily Housing | Mar 4, 2024
Single-family rentals continue to grow in BTR communities
Single-family rentals are continuing to grow in built-to-rent communities. Both rent and occupancy growth have been strong in recent months while remaining a financially viable option for renters.
MFPRO+ News | Mar 2, 2024
Job gains boost Yardi Matrix National Rent Forecast for 2024
Multifamily asking rents broke the five-month streak of sequential average declines in January, rising 0.07 percent, shows a new special report from Yardi Matrix.
K-12 Schools | Feb 29, 2024
Average age of U.S. school buildings is just under 50 years
The average age of a main instructional school building in the United States is 49 years, according to a survey by the National Center for Education Statistics (NCES). About 38% of schools were built before 1970. Roughly half of the schools surveyed have undergone a major building renovation or addition.
MFPRO+ Research | Feb 27, 2024
Most competitive rental markets of early 2024
The U.S. rental market in early 2024 is moderately competitive, with apartments taking an average of 41 days to find tenants, according to the latest RentCafe Market Competitivity Report.
Construction Costs | Feb 22, 2024
K-12 school construction costs for 2024
Data from Gordian breaks down the average cost per square foot for four different types of K-12 school buildings (elementary schools, junior high schools, high schools, and vocational schools) across 10 U.S. cities.
Student Housing | Feb 21, 2024
Student housing preleasing continues to grow at record pace
Student housing preleasing continues to be robust even as rent growth has decelerated, according to the latest Yardi Matrix National Student Housing Report.
Architects | Feb 21, 2024
Architecture Billings Index remains in 'declining billings' state in January 2024
Architecture firm billings remained soft entering into 2024, with an AIA/Deltek Architecture Billings Index (ABI) score of 46.2 in January. Any score below 50.0 indicates decreasing business conditions.
Multifamily Housing | Feb 14, 2024
Multifamily rent remains flat at $1,710 in January
The multifamily market was stable at the start of 2024, despite the pressure of a supply boom in some markets, according to the latest Yardi Matrix National Multifamily Report.
Student Housing | Feb 13, 2024
Student housing market expected to improve in 2024
The past year has brought tough times for student housing investment sales due to unfavorable debt markets. However, 2024 offers a brighter outlook if debt conditions improve as predicted.
Contractors | Feb 13, 2024
The average U.S. contractor has 8.4 months worth of construction work in the pipeline, as of January 2024
Associated Builders and Contractors reported today that its Construction Backlog Indicator declined to 8.4 months in January, according to an ABC member survey conducted from Jan. 22 to Feb. 4. The reading is down 0.6 months from January 2023.