California Construction News staff writer
The price of materials and services used in nonresidential construction projects jumped 12.6 percent in September compared to 2021, according to an analysis by the Associated General Contractors (AGC) of America. Association officials say inflation and new Buy America rules set to go into effect as soon as next month will only make the situation more dire.
“Today’s price report shows that costs for construction continue to outpace those of other industries,” said Ken Simonson, chief economist. “Furthermore, the steep runup in diesel prices in the last few weeks is likely to make projects still more expensive to complete.”
The producer price index for nonresidential construction—the prices charged by goods producers and service providers such as distributors and transportation firms—decreased 0.2 percent from August to September but sits 12.6 percent above September 2021 levels.
Retail diesel fuel prices soared by 39 cents per gallon in the past week, bringing the year-over-year increase to $1.64 or 45.7 percent, Simonson said, adding construction is especially sensitive to diesel costs, because most projects require thousands of truckloads to deliver equipment and materials and to move or haul away dirt, debris, and equipment at the end of project.
Prices of several widely used goods posted double-digit increases over the past 12 months including liquid asphalt used in paving projects up 43.3 percent and paint and other architectural coatings up 27.2 percent over 2021 prices.
There were also unusually large year-over-year increases in the price indexes for gypsum products such as wallboard, 18.4 percent; plastic construction products, 17.9 percent; truck transportation of freight, 16.3 percent; asphalt and tar roofing materials, 15.3 percent; concrete products, 14.3 percent; insulation products, 13.4 percent; and flat glass, 10.3 percent.
Association officials are urging the Biden Administration to reconsider plans to implement a series of new Buy America requirements, noting a recent survey of member firms that showed most contractors will struggle to find materials under the new guidelines.
“It stands to reason that further limiting the supply of already scarce materials will lead to even more inflation in the cost of those materials,” said Stephen E. Sandherr, the association’s chief executive officer. “Imposing new Buy America requirements at a time like this will undermine the potential benefits of new federal infrastructure investments.”