Construction Material Costs Increase by 7.4 Percent, Tariffs Continue

October 16, 2018
Construction workers on site.

Double-digits increases in diesel fuel and asphalt contributed to an overall 7.4-percent increase in construction material costs over the past year, according to an analysis by The Associated General Contractors. Diesel fuel, steel pipe and tube, asphalt paving mixtures, and aluminum products were among the products that contributed to large cost increases. Chief economist Ken Simonson suggests increases may not reflect the effects of tariffs.

“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,” Simonson said. “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.”

According to Simonson, producer price index for inputs to construction industries increased 1.2 percent from August to September, and rose 6.2 percent since September 2017. The index for goods except services rose at a faster pace of 7.4 percent.

From September 2017 to 2018, producer price indexes increased by 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 10.7 percent for aluminum mill shapes.

The Trump administration also recently imposed an interim tariff of 10 percent on $200 billion worth of Chinese imports, and plans to increase the rate to 25 percent next year.

Source: AGC