Rising construction materials prices appear to be starting to drive up the price of construction projects, according to a recent analysis by the Associated General Contractors of America of government data. Association officials noted that despite a big jump in what contractors charge for projects, the rise in materials prices is still much higher.
“After being battered by unprecedented price increases for many materials, contractors are finally passing along more of their costs,” said Ken Simonson, the association’s chief economist. “Meanwhile, supply-chain bottlenecks and labor shortages continue to impede contractors’ ability to finish projects.”
The producer price index for new nonresidential construction – a measure of what contractors say they would charge to erect five types of nonresidential buildings – jumped 7.1 percent from September to October and 12.6 percent over the past 12 months. But an index of input prices – the prices that goods producers and service providers such as distributors and transportation firms charged for inputs for nonresidential construction – climbed by an even steeper 21.1 percent compared to October 2020, including a 1.3 percent increase since September, Simonson noted.
Many products, as well as trucking services, contributed to the extreme runup in construction costs, Simonson observed. The price index for steel mill products more than doubled, soaring nearly 142 percent since October 2020. The indexes for both aluminum mill shapes and copper and brass mill shapes jumped more than 37 percent over 12 months, while the index for plastic construction products rose more than 30 percent. The index for gypsum products such as wallboard climbed 25 percent and insulation costs increased 17 percent. Trucking costs climbed 16.3 percent. The index for diesel fuel, which contractors buy directly for their own vehicles and off-road equipment and also indirectly through surcharges on deliveries of materials and equipment, doubled over the year.