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 | Apr 23, 2020
5 must reads for the AEC industry today: April 23, 2020
The death of the department store and how to return to work when the time comes.
Market Data | Apr 22, 2020
6 must reads for the AEC industry today: April 22, 2020
Repurposed containers can be used as rapid response airborne infection isolation rooms and virtual site visits help control infection on project sites.
Market Data | Apr 21, 2020
ABC's Construction Backlog Indicator down in February
Backlog for firms working in the infrastructure segment rose by 1.3 months in February while backlog for commercial and institutional and heavy industrial firms declined by 0.6 months and 0.7 months, respectively.
Market Data | Apr 21, 2020
5 must reads for the AEC industry today: April 21, 2020
IoT system helps contractors keep their distance and the multifamily market flattens.
Market Data | Apr 20, 2020
6 must reads for the AEC industry today: April 20, 2020
The continent's tallest living wall and NMHC survey shows significant delays in apartment construction.
Market Data | Apr 17, 2020
Construction employment declines in 20 states and D.C. in March, in line with industry survey showing growing job losses for the sector
New monthly job loss data foreshadows more layoffs amid project cancellations and state cutbacks in road projects as association calls for more small business relief and immediate aid for highway funding.
Market Data | Apr 17, 2020
5 must reads for the AEC industry today: April 17, 2020
Meet the 'AEC outsiders' pushing the industry forward and the world's largest Living Building.
Market Data | Apr 16, 2020
5 must reads for the AEC industry today: April 16, 2020
The SMPS Foundation and Building Design+Construction are studying the impact of the coronavirus pandemic on the ability to attain and retain clients and conduct projects and Saks Fifth Avenue plans a sanitized post-coronavirus opening.
Market Data | Apr 15, 2020
5 must reads for the AEC industry today: April 15, 2020
Buildings as "open source platforms" and 3D printing finds its grove producing face shields.
Market Data | Apr 14, 2020
6 must reads for the AEC industry today: April 14, 2020
A robot dog conducts site inspections and going to the library with little kids just got easier.