Price increases—some to record-setting levels—and long delivery delays are causing hardships for construction firms that are also experiencing challenges in completing projects with crews limited by illness or new work site procedures resulting from the pandemic, according to an analysis by the Associated General Contractors of America of government data released today. Association officials urged the Biden administration to review and rescind a range of trade tariffs in place, including for Canadian lumber, that are contributing to the price increases.
“The extreme price increases, as reflected in today’s producer price index report and other sources, are harming contractors on existing projects and making it difficult to bid new work at a profitable level,” said Ken Simonson, the association’s chief economist. “While contractors have kept bids nearly flat until now, project owners and budget officials should anticipate the prospect that contractors will have to pass along their higher costs in upcoming bids.”
Prices for materials and services used in construction and contractors’ bid prices both declined at the beginning of the pandemic but have diverged sharply since last April, Simonson said. A government index that measures the selling price for materials and services used in new nonresidential construction increased 2.5 percent from December to January and 10.7 percent since April. 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 0.2 percent over both the latest month and the nine months since April.
“The government data was collected more than a month ago, and numerous sources indicate price increases have continued or even accelerated since then,” Simonson added. “For instance, the Framing Lumber Composite Price compiled by the publication Random Lengths hit an all-time high last week. Several steel product prices are also reported at record levels, and copper futures are at an eight-year peak. Meanwhile, delivery delays are affecting both imports and domestically sourced construction inputs.”
Association officials said that while there are a range of reasons driving price spikes for key building materials, tariffs on numerous materials, including lumber and steel, are contributing to those cost increases. They urged the Biden administration to rescind these tariffs to provide immediate relief to construction employers caught between stagnant bid prices and rising materials costs. They also urged the administration and Congress to explore new ways to expand capacity for a host of key construction materials by reviewing regulatory impediments to expanding logging and steel production, for example.
“Left unchecked, these rising materials prices threaten to undermine the economic recovery by inflating the cost of infrastructure and economic development projects,” said Stephen E. Sandherr, the association’s chief executive officer. “Widespread harm is caused by maintaining tariffs on products that so many Americans need to improve their houses, modernize their infrastructure and revitalize their economy.”
View producer price index data. View chart of gap between input costs and bid prices.
Related Stories
Market Data | Jul 27, 2020
6 must reads for the AEC industry today: July 27, 2020
Customized labs give universities a recruiting edge and the U.S. construction pipeline remains robust through the first half of 2020.
Market Data | Jul 27, 2020
The U.S. construction pipeline remains robust through the first half of 2020, despite pandemic
Projects currently under construction stand at 1,771 projects/235,467 rooms, up 3% and 1% respectively, YOY.
Market Data | Jul 24, 2020
5 must reads for the AEC industry today: July 24, 2020
North Carolina will stop relying on FEMA flood mapping and Cal Poly Pomona's newest project.
Market Data | Jul 23, 2020
New LEED guidance from USGBC helps cities and communities expand resilience efforts in response to the COVID-19 pandemic
Credits integrate public health and social equity with sustainability planning.
Market Data | Jul 23, 2020
6 must reads for the AEC industry today: July 23, 2020
Skanska selects Pickard Chilton to design new ofice tower and days grow long at nursing homes as virus lockdowns drag on.
Market Data | Jul 22, 2020
6 must reads for the AEC industry today: July 22, 2020
Phase one of Toronto's The Orbit detailed and architecture billings remains in negative territory.
Market Data | Jul 21, 2020
Nonresidential building spending to decline through 2021
The commercial building sector is expected to be the hardest hit.
Market Data | Jul 21, 2020
7 must reads for the AEC industry today: July 21, 2020
Abandoned high-rise becomes mixed-use luxury apartments and researchers are developing anti-coronavirus tech for buildings.
Market Data | Jul 20, 2020
Construction employment rises from May to June in 31 states, slips in 18
Recent data from Procore on jobsite workers’ hours indicates employment may have leveled off.
Market Data | Jul 20, 2020
6 must reads for the AEC industry today: July 20, 2020
Never waste a crisis and robotic parking systems help developers optimize parking amenities.