AGC Warns of Material Cost Increases
December 15, 2010

Huge jumps in prices for diesel fuel and copper—two key inputs to construction—pinched contractors in November as weak demand for construction forced them to hold down bid prices despite the cost increases, according to an analysis of November producer price index figures released today by the Associated General Contractors of America (AGC). Prices for materials used in construction climbed 0.5 percent in November and 4.8 percent over the past 12 months, while price indexes for finished buildings remained flat over both time periods. The PPI for finished goods went up 0.4 percent for the month and 3.5 percent year-over-year.

“These price jumps, along with further increases since PPI data were collected in mid-November, could be the last straw for some hard-pressed contractors,” says Ken Simonson, the association’s chief economist. “With unemployment in construction running at 18.8 percent in November—double the all-industry average—any more business failures will only add to the industry’s misery.”

“Contractors have been unable to recoup these costs in what they charge,” Simonson adds.

He forecasted that contractors would experience periods of simultaneous price spikes in multiple materials in 2011 as the U.S. and foreign economies pick up speed.

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