Producer Prices for Construction Materials and Services Jump 24 Percent Over 12 Months

The cost of goods and services used in construction climbed by a record-setting 4.3 percent in May and 24.3 percent over the past 12 months according to a recent analysis by the Associated General Contractors of America of government data.

“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 percent 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 percent 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 percent from May 2020 to last month. The index for steel mill products climbed 75.6 percent, while the index for copper and brass mill shapes rose 60.4 percent and the index for aluminum mill shapes increased 28.6 percent. The index for plastic construction products rose 17.5 percent. The index for gypsum products such as wallboard climbed 14.1 percent. 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.

View producer price index data. View chart of gap between input costs and bid prices.

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