Materials Prices for Nonresidential Construction Soar 21%
Prices of construction materials used in new nonresidential construction jumped more than 21% from February 2021 to February 2022, according to an analysis by the Associated General Contractors of America of government data released March 15. The association noted that more recent price announcements made after the February data was collected suggest contractors are experiencing even worse cost pressures this spring.
“Even though the February numbers represent some of the highest year-over-year price increases ever recorded, they have already been surpassed by even steeper price hikes since the war in Ukraine broke out,” said Ken Simonson, the association’s chief economist. “Since the time these prices were collected, multiple increases have taken effect for metals, fuel and trucking, while supply chains have become even more snarled.”
The producer price index for inputs to new nonresidential construction—the prices charged by goods producers and service providers such as distributors and transportation firms—increased by 2.0% from January to February and 19.1% over the past 12 months. In comparison, the index for new nonresidential construction—a measure of what contractors say they would charge to erect five types of nonresidential buildings—climbed by 0.6% for the month and 17.0% from a year earlier.
Prices climbed at double-digit rates for nearly all categories of inputs in the cost index, Simonson noted. The price index for diesel fuel leaped 57.5% over 12 months. The index for steel mill products climbed 74.4%. The index for aluminum mill shapes jumped 37.3%. The index for plastic construction products rose 35.6% over 12 months.
In addition, year-over-year increases exceeded 20% for the indexes covering copper and brass mill shapes, 24.4%; lumber and plywood, 22.5%; asphalt and tar roofing and siding products, 22.5%; gypsum products, 20.7%; and architectural coatings, 20.3%. Other inputs with double-digit increases for the past 12 months include truck transportation of freight, 19.1%; insulation materials, 17.8%; concrete products, 10.0%; and flat glass, 10.0%.
AGC officials said rising materials prices and tight labor market conditions are forcing contractors to charge more to build projects. They warned, however, that further price increases could undermine demand for some construction projects, threatening the sector’s recovery.