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Prices of construction materials jumped more than +20% year-over-year (YOY), according to an analysis of government data by the Associated General Contractors of America.
“Unfortunately, there has been no letup early this year in the extreme cost run-up that contractors endured in 2021,” said Ken Simonson, the association’s chief economist in the press release. “They are apparently passing on more of those costs but will have a continuing challenge in getting timely deliveries and finding enough workers.”
The Producer Price Index published monthly by the U.S. Bureau of Labor Statistics says inputs to new nonresidential construction — the prices charged by goods producers and service providers such as distributors and transportation firms — increased by +2.6% from December to January and +20.3% over the past 12 months. In comparison, the index for new nonresidential construction — a measure of what contractors say they would charge to erect five types of nonresidential buildings — climbed by +3.8% for the month and 16.5% from a year earlier.
AGC said the price index for steel mill products soared +112.7% YOY despite declining -1.6% in January. The index for plastic construction products climbed +1.8% for the month and +35% over 12 months. The index for diesel fuel jumped +5.1% in January and +56.5%. The index for aluminum mill shapes jumped +5.6% in January and +32.7% YOY, while the index for copper and brass mill shapes rose +4.1% in January and +24.8% over the year. Architectural coatings such as paint had an unusually large price gain of +9% in January and +24.3% YOY. The index for lumber and plywood leaped +15.4% for the month and +21.1% YOY. Other inputs with double-digit increases for the past 12 months include roofing asphalt products, +19.8%; insulation +19.2%; trucking, +18.3%; and construction machinery and equipment, +11.4%.
Association officials said construction firms are being squeezed by increased costs for materials and labor shortages. They urged federal officials to take additional steps to address supply chain disruptions and rising materials prices. These include continuing to remove costly tariffs on key construction components.
“Spiking materials prices are making it challenging for most firms to profit from any increases in demand for new construction projects,” said Stephen Sandherr, the association’s CEO in the press release. “Left unabated, these price increases will undermine the economic case for many development projects and limit the positive impacts of the new infrastructure bill.”