Material Costs Jump in 2016

February 16th, 2017 | Category: Industry News

The cost of materials used in construction rose significantly faster than the price of completed buildings, according to an analysis of federal producer price data by the Associated General Contractors of America (AGC).

“Steep price hikes have hit a wide range of key materials used in construction in the past few months, and contractors have received numerous letters from vendors announcing large additional increases in the next month or two,” says Ken Simonson, the association’s chief economist. “For the most part, contractors cannot pass these costs along on projects already underway, and the data show they are not yet able to price new buildings at a level that reflects their rising materials and labor costs.”

From January 2016 to January 2017, there was a 3.8 percent rise in the producer price index for goods used in construction. Another government report showed that average hourly earnings for all workers in construction climbed 3.2 percent over the same period, Simonson notes. Meanwhile, the price index for new nonresidential buildings—what contractors charge for their work—increased just 1.4 percent.

Association officials cited three types of proposals that threaten to drive construction costs even higher: an expansion of restrictive “Buy America” provisions for construction materials to a wider variety of federally funded infrastructure projects; punitive tariffs on imported steel used in many types of buildings; and limitations on Canadian lumber that is commonly used in residential projects.

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