An unprecedented leap in the price of goods used in construction and supply-chain disruptions are wreaking hardships on contractors and slowing projects, according to an analysis by the Associated General Contractors of America of government data released today. The association posted a Construction Inflation Alert to update contractors and their clients about the latest developments. Association officials urged the Biden administration to end a variety of tariffs and quotas on imported construction inputs and to help ease domestic supply-chain problems.
“Today’s producer price index report documents just some of challenges contractors are experiencing with fast-rising materials costs, lengthening or uncertain delivery times, and rationing of key inputs,” said Ken Simonson, the association’s chief economist. “These problems threaten to drive up the cost and completion time for many vital projects and potentially set back the recovery in construction employment.”
Prices for materials and services used in construction and contractors’ bid prices both declined at the beginning of the pandemic but have diverged in the past year, Simonson said. A government index that measures the selling price for goods used construction jumped 3.5% from February to March and 12.9% since March 2020. Both the monthly and yearly increases were the highest recorded in the 35-year history of the series, he noted. 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—increased only 0.5% last month and 1.7% over the past 12 months.
“These material cost increases—steep as they are—tell only part of the story,” Simonson added. “They are based on prices the government collected a month ago, and they fail to capture the notices contractors are receiving daily about longer lead times, shipments held to a fraction of previous orders, and other challenges.”
Association officials said some of the supply chain problems are being caused by the pandemic, which is leaving manufacturers and shippers shorthanded amid growing demand for a host of products. But they added that federal policies, particularly tariffs and quotas on key building materials like lumber and steel, are also contributing to price spikes, supply shortages, and delivery delays. They urged the administration to remove those import barriers and explore ways to help unclog shipping backups.
“The Biden administration must address soaring lumber and steel costs and broader supply chain woes with the same energy they are putting into dealing with shortages of automotive microchips,” said Stephen E. Sandherr, the association’s chief executive officer. “Without tariff relief and other measures, construction employers will have little ability to invest in new equipment and hire new employees.”
View producer price index data. View chart of gap between input costs and bid prices. View AGC’s Alert.
Related Stories
Market Data | Dec 2, 2020
New Passive House standards offers prescriptive path that reduces costs
Eliminates requirement for a Passive House consultant and attendant modeling.
Market Data | Dec 2, 2020
Nonresidential construction spending remains flat in October
Residential construction expands as many commercial projects languish.
Market Data | Nov 30, 2020
New FEMA study projects implementing I-Codes could save $600 billion by 2060
International Code Council and FLASH celebrate the most comprehensive study conducted around hazard-resilient building codes to-date.
Market Data | Nov 23, 2020
Construction employment is down in three-fourths of states since February
This news comes even after 36 states added construction jobs in October.
Market Data | Nov 18, 2020
Architecture billings remained stalled in October
The pace of decline during October remained at about the same level as in September.
Market Data | Nov 17, 2020
Architects face data, culture gaps in fighting climate change
New study outlines how building product manufacturers can best support architects in climate action.
Market Data | Nov 10, 2020
Construction association ready to work with president-elect Biden to prepare significant new infrastructure and recovery measures
Incoming president and congress should focus on enacting measures to rebuild infrastructure and revive the economy.
Market Data | Nov 9, 2020
Construction sector adds 84,000 workers in October
A growing number of project cancellations risks undermining future industry job gains.
Market Data | Nov 4, 2020
Drop in nonresidential construction offsets most residential spending gains as growing number of contractors report cancelled projects
Association officials warn that demand for nonresidential construction will slide further without new federal relief measures.
Market Data | Nov 2, 2020
Nonresidential construction spending declines further in September
Among the sixteen nonresidential subcategories, thirteen were down on a monthly basis.