Construction Input Costs Rise 0.4 Percent In February, Outpacing Bid-Price Increase Of 0.1 Percent, As Wide Variety Of Materials Posts Price Gains
Large Increases Hit Price Indexes for Flat Glass, Metals, Cement, and Paving Materials; Association Officials Urge Federal Leaders to Ease Proposed Rules that Will Make Products Even More Expensive
The price of materials and services used in nonresidential construction increased by 0.4 percent from January to February, outpacing the 0.1 percent increase in contractors’ bid prices, according to an analysis by the Associated General Contractors of America of government data released today. Association officials urged the Biden Administration to rethink planned Buy America limits on the materials firms can use on a broad range of projects that will make many key materials even more expensive.
“Today’s price report shows that construction costs are not necessarily settling back to ‘normal’,” said Ken Simonson, the association’s chief economist. “A resurgence of prices for glass, metals, cement, and paving materials suggests many projects may get more expensive in coming months.”
The producer price index for inputs to nonresidential construction—the prices charged by goods producers and service providers such as distributors and transportation firms—climbed 0.4 percent from January to February. That topped the 0.1-percent rise in price index for new nonresidential building construction, a measure of what contractors say they would charge to put up a specific set of buildings.
Moreover, the mild overall reading for input costs masked substantial price increases from January to February for several key building blocks, Simonson noted. The price index for flat glass soared by 4.0 percent, the largest one-month increase in 40 years. The index for steel mill products jumped 2.6 percent, following eight consecutive monthly declines. The index for copper and brass mill shapes rose for the fourth month in a row, by 2.3 percent, while the index for aluminum mill shapes posted a 2.9-percent rise, on top of a 3.3-percent spike in January. The index for asphalt paving mixtures and blocks climbed 2.2 percent in February and the index for cement rose for the ninth-straight month, by 1.1 percent.
This diverse set of price increases outweighed decreases in a few inputs that benefited from a recent drop in oil and natural-gas prices. The price index for diesel fuel fell 3.1 percent. The index for truck transportation of freight slid 0.8 percent and the index for plastic construction products declined 0.5 percent.
Association officials said the Biden administration’s proposed Buy America requirements will severely limit construction firms’ ability to procure key construction materials and contribute to new inflationary pressure on the cost of those items. The urged the administration to rethink its proposed Buy America regulations for recipients of federal construction funds to align with the rules that apply to direct federal projects.
“Limiting the availability of materials used on the billions in federally funded construction projects planned for the coming years will needlessly inflate the cost of construction and contribute to broader inflationary pressure,” said Stephen E. Sandherr, the association’s chief executive officer. “Instead they should allow for the same kind of flexibility on federally-funded state and local projects that exists when the federal government procures its own construction projects.”
View producer price index data.