Decreasing diesel fuel and metals prices offset the increases in new housing and nonresidential renovation materials in March, according to analysis of federal data by the Associated General Contractors of America (AGC).
“Thanks to a recent, sharp drop in diesel fuel prices last month—along with continuing declines in steel, copper and aluminum prices—overall construction costs were unchanged from February and up only 0.9 percent over the past year,” said Ken Simonson, AGC’s chief economist. “However, building contractors had to absorb another month of increases in the cost of lumber and plywood, gypsum products, construction plastics, paint and roofing materials.”
The largest monthly price decrease among construction inputs occurred in the producer price index for diesel fuel, which decreased 6 percent in March and 6.7 percent over 12 months. There were also monthly and year-over-year decreases in the indexes for copper and brass mill shapes, which fell 2.6 percent and 5.5 percent, respectively; steel mill products, down 0.4 percent and 9.5 percent; and aluminum mill shapes, down 0.1 percent and 2.7 percent.
The producer price index for lumber and plywood rose 3.7 percent since February and 17.7 percent since March 2012. The index for gypsum products such as wallboard and plaster rose 0.7 percent and 17.9 percent, respectively. The cost of plastic construction products rose 0.5 percent and 1.5 percent, while the index for architectural coatings such as paint increased 0.4 percent and 0.6 percent, and the index for prepared asphalt and tar roofing and siding products rose 0.3 percent and 8.6 percent.
“Contractors have held the line on pricing, even as costs shoot up for some items they buy,” Simonson said. “The net effect of these diverse changes is that some contractors may be squeezed out of business if they are caught by an unanticipated price spike.”
Association officials noted that years of relatively weak demand for construction services have depleted many contractors’ reserves, leaving them particularly vulnerable to sudden fluctuations in materials prices.
“It is going to take a lot more growth in construction demand before many contractors have the cushion needed to protect themselves from future price surges,” said Stephen E. Sandherr, the AGC’s CEO.