Report: Construction firms getting squeezed by increasing materials, labor costs

The cost of materials and services used in construction rose markedly faster than the price of completed buildings, according to a new analysis of federal producer price data released today by the Associated General Contractors of America. Association officials cautioned that potential restrictions on the use of imported construction materials threaten to drive up the price of infrastructure, buildings and new homes and apartments. 
From January 2016 to January 2017, there was a 3.1 percent rise in the producer price index for inputs to construction industries—the government’s broadest measure of the cost of goods, energy and services that go into all types of construction, ranging from highways and other infrastructure to schools, private buildings, apartments and houses. Another government report showed that averagely hourly earnings for all workers in construction climbed 3.2 percent over the same period. Meanwhile, the price index for new nonresidential buildings – what contractors charge for their work – increased just 1.4 percent.
Among the major contributors to the rise in construction materials costs over the past year were increases in the cost of copper and brass mill shapes (19.9 percent), steel mill products (11.4 percent) and lumber and plywood (3.7 percent). In addition, diesel fuel, which contractors use directly and also pay for through surcharges on the thousands of deliveries to construction sites, jumped by 34.8 percent.
Association officials cited three types of proposals that threaten to drive construction costs even higher: an expansion of restrictive “Buy America” provisions for construction materials to a wider variety of federally funded infrastructure projects; punitive tariffs on imported steel used in many types of buildings; and limitations on Canadian lumber that is commonly used in residential projects.
View AGC’s producer price index tables and explanation.