Prices for building materials used in new nonresidential construction jumped more than 21% from February 2021 to February 2022, according to an analysis of government data by the Associated General Contractors of America (AGC).
The association noted that more recent price announcements made after the February data collection suggest contractors are facing even worse cost pressures this spring.
“Even though the February figures represent some of the highest year-over-year price increases on record, they have already been overtaken by even steeper price increases since the start of the war in Ukraine,” says Ken Simonson, AGC’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 difficult.”
The producer price index for new non-residential construction inputs – prices charged by producers of goods and service providers such as distributors and transportation companies – rose 2% from January to February and 19.1% since February last year.
By comparison, the non-residential new construction index – a measure of what contractors say they would charge to erect five types of non-residential buildings – climbed 0.6% for the month and 17% from to the previous year.
Prices have climbed at double-digit rates for nearly every input category in the cost index, notes Simonson. The diesel fuel price index jumped 57.5% year-over-year, while the steel products index climbed 74.4%. The aluminum factory shapes price index jumped 37.3% and the plastic building products index rose 35.6% year-on-year.
In addition, February to February increases exceeded 20% for indices covering forms of copper and brass factories, 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 percent.
Other inputs with double-digit increases over the past 12 months include freight trucking, 19.1%; insulation materials, 17.8%; concrete products, 10%; and flat glass, 10 percent.
Association officials say rising material prices and tight labor market conditions are forcing contractors to charge more to build projects. They warn, however, that further price increases could undermine demand for some construction projects, threatening the recovery of the sector.
Officials are calling for new efforts to facilitate supply chain safeguards and urging public officials to allow change orders to reflect rapidly escalating material prices.
“At some point, projects will no longer be penciled in as contractors need to raise bid prices to keep pace with rapid material cost inflation,” said AGC CEO Stephen Sandherr. “Officials can help by giving contractors more flexibility to adjust contract amounts to keep pace with soaring material prices.”