Construction Materials Prices Up 2.0 Percent in March, 6.9 Percent in Past 12 Months
April 15, 2011

Contractors’ financial position grew more precarious in March as prices for key materials escalated while prices construction firms charge for completed projects stayed flat, according to an analysis of producer price index figures released by the Associated General Contractors of America (AGC). Association officials said contractors’ inability to pass costs along imperils the industry’s comeback and urged federal officials to act on a series of recovery measures the group outlined last month.

“Construction spending has sunk to 1999 levels, forcing contractors to keep bid prices down to win projects, despite huge price increases for key inputs,” says Ken Simonson, the association’s chief economist. “That steadily widening gulf threatens to put construction firms out of business and their employees out of work.”

Prices for materials used in construction soared 2.0 percent in March and 6.9 percent during the past 12 months, while price indexes for finished buildings were flat for the month and year, Simonson notes. He adds that construction materials costs rose faster than the producer price index for finished goods, which climbed 5.8 percent from March 2010 to March 2011.

“Shrinking demand for both public and privately financed construction is driving up the number of contractors bidding on projects and forcing contractors to hold the line on bid prices for all types of projects,” Simonson says. The producer price indexes for new office, industrial and warehouse construction rose 1 percent or less over 12 months and the index for new schools was up just 1.3 percent.

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