AGC: Rising Materials Costs Threaten to Undermine Recovery

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 3.4% over the past 12 months. That was a small fraction of the 26.3% increase in the prices that producers and service providers such as distributors and transportation firms charged for construction inputs, Simonson noted.

There were double-digit percentage increases in the selling prices of materials used in every type of construction. The producer price index for lumber and plywood doubled from June 2020 to last month, although prices for lumber have declined since the index was computed. The index for steel mill products climbed 87.5%, while the index for copper and brass mill shapes rose 61.5% and the index for aluminum mill shapes increased 33.2%. The index for plastic construction products rose 21.8%. The index for gypsum products such as wallboard climbed 18.0%. The index for prepared asphalt and tar roofing and siding products climbed 12.1%, while the index for insulation materials rose 10.1%.

In addition to increases in materials costs, transportation and fuel costs also spiked. The index for truck transportation of freight jumped 15.4%. 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 urged Congress and the Biden administration to act quickly to address rising materials prices. They repeated their calls for the president to remove tariffs on key construction materials, including steel and aluminum. They also urged Washington officials to explore other short-term steps needed to improve the supply chain for key construction materials.

“Construction firms will have a hard time adding new staff while they are paying more and more for many of the products they need to build projects,” said Stephen E. Sandherr, the association’s chief executive officer. “Washington officials can take steps that are likely to have an almost immediate impact on materials prices, but they need to act.”