AGC: Construction Costs Jump 7.4 Percent

Simonson noted that the producer price index for inputs to construction industries—a weighted average of all goods and services used in construction—increased 0.2 percent from August to September and soared 6.2 percent since September 2017, while the index for goods except services rose at a faster pace of 7.4 percent. In contrast, an index that measures what contractors say they would charge to construct five types of nonresidential buildings rose just 3.5 percent over the year, indicating that contractors were absorbing more of the costs than they were passing on to owners.

{loadposition reserved_message}

Diesel fuel, steel pipe and tube, asphalt paving mixtures and aluminum products were among the diverse products that contributed to the large year-over-year cost increases, the economist said. He pointed out that from September 2017 to September 2018, there were producer price index increases of 29.3 percent for diesel fuel, 22.1 percent for steel pipe and tube, 11.7 percent for fabricated structural metal, 11.2 percent for asphalt paving mixtures and blocks and 10.7 percent for aluminum mill shapes. Additionally, the administration recently imposed an interim tariff of 10 percent on $200 billion worth of Chinese imports, including goods important to the construction industry, and plans to increase the rate to 25 percent in the new year.

A survey the association released in August found that 80 percent of respondents reported difficulty filling hourly craft worker positions. As a result, 62 percent of firms report they are paying higher salaries to attract and retain workers. “The more firms get squeezed by higher materials and labor costs, the less likely they are to continue hiring and investing in new equipment,” said Stephen E. Sandherr, the association’s chief executive officer.