AGCA analysis reveals increase in cost of construction products

A survey released by the AGCA found 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. Photo courtesy Pixabay

The cost of construction products climbed 7.4 percent over the past year due to double digit increases in commonly-used materials, according to an analysis by the Associated General Contractors of America (AGCA)’s new Labor Department.

AGCA officials said cost increases come as many construction firms are faced with shortages of skilled craftspeople essential for projects but have limited ability to increase prices for their services.

“The new construction materials cost data likely under-reports actual price increases, since federal officials collected most of their data in the first half of the month, before new tariffs affecting many construction materials started,” said the association’s chief economist, Ken Simonson. “Contractors are paying more for the materials they use and workers they employ but aren’t able to pass most of those new costs on to their clients.”

Simonson noted 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. In contrast, an index measuring what contractors say they would charge to construct five types of nonresidential buildings rose 3.5 percent over the year, indicating contractors were absorbing more of the costs than they were passing on to owners.

Diesel fuel, steel pipe and tube, asphalt paving mixtures, and aluminum were among the products contributing to the year-over-year cost increases, said Simonson.

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