Construction Costs Increase in March: AGC

April 11, 2018

Construction costs climbed again in March, with increases for a wide range of building materials, including many that are subject to proposed tariffs that could drive prices still higher and cause scarcities, according to an analysis by the Associated General Contractors of America of Labor Department data.

Compared to March 2017, the producer price index jumped by 13.7 percent for lumber and plywood, 11.4 percent for aluminum mill shapes, and 4.9 percent for steel mill products. The U.S. has been in a dispute with Canada over lumber imports, has imposed tariffs on several types of steel, and has announced or recently imposed additional tariffs—not reflected in the March price index—on steel, aluminum, and numerous Chinese construction products.

Other construction inputs that rose sharply in price include diesel fuel, 39.7 percent; copper and brass mill shapes, 11.2 percent; gypsum products, 8.4 percent; and plastic construction products, 5.8 percent. In addition, concrete and other suppliers announced significant price hikes that were due to take effect in April.

"Prices increased for many items in March, even before tariffs announced for steel, aluminum and many items imported from China have taken effect," said Ken Simonson, AGC chief economist. "Steel service centers and other suppliers are warning there is not enough capacity at U.S. mills or in the trucking industry to deliver orders on a timely basis. Thus, contractors are likely to experience still higher prices as well as delivery delays in coming months."

The producer price index for inputs to construction industries, goods—a measure of all materials used in construction projects including items consumed by contractors, such as diesel fuel—rose 0.8 percent in March alone and 5.8 percent over 12 months. The year-over-year increase was the steepest since 2011, the economist noted.

"Many items contributed to the latest round of increases," Simonson said. "Moreover, today's report only reflects prices charged as of mid-March. Since then, some tariffs have taken effect, many others have been proposed, and producers of steel and concrete have implemented or announced substantial additional increases."

Source: AGC