AGC: Costs Cool, Will Rise

Staff | September 28, 2010

"Construction materials costs took a pleasing plunge in November, while other producer prices rose," Ken Simonson, chief economist for The Associated General Contractors of America (AGC), said in December. "But the next 12 months are still likely to show higher costs for construction than for the economy as a whole," Simonson said in response to the December 19 producer price index (PPI) report from the Bureau of Labor Statistics.

"The index for construction materials and components dropped half a percent in November, even as the overall PPI for finished goods climbed 0.8 percent," Simonson remarked. "But over the last 12 months, construction costs have jumped 5 percent, versus 2 percent for the consumer price index and a skimpy 0.9 percent for the finished-goods PPI.

"The recent retreat in construction costs was widespread but not universal," Simonson commented. "There were price declines in November for diesel fuel and asphalt, plastic construction products, lumber and plywood, gypsum products, and steel and copper products. But there were continuing increases in the prices of most concrete products, brick and aluminum mill shapes.

"As long as demand in industrializing countries remains strong, construction is likely to face higher costs for materials that depend on world markets," Simonson noted. "And with diesel prices stuck near $2.60 per gallon, the cost of delivering materials to job sites and running the equipment to install them will keep costs high."