Construction Materials Prices Rise 0.5 Percent In April While Bid Prices Slip, Reversing Recent Pattern And Squeezing Contractor Profits

Double-Digit Annual Cost Increases Persist for Several Materials Despite Recent Price Declines for Some; Association Officials Say Administration’s Approach to Buy America Rules is Contributing to Price Inflation

The price of materials and services used in nonresidential construction increased 0.5 percent from March to April, while an index that measures contractors’ bid prices declined 0.3 percent, according to an analysis by the Associated General Contractors of America of government data released today. Association officials said the new data indicates contractors are getting squeezed by rising materials prices at a time when what they charge to build projects is declining.

“Prices remain volatile for many key construction materials, making it difficult for contractors to bid projects that may take years to complete,” said Ken Simonson, the association’s chief economist. “Even some materials that have dropped in price recently have still posted year-over-year increases exceeding 10 percent.”

The producer price index for inputs to nonresidential construction, which is a weighted average of the prices charged by goods producers and service providers such as distributors and transportation firms, rose 0.5 percent from March to April—the largest increase since January, Simonson noted. Meanwhile, the index for new nonresidential construction—a measure of what contractors report they would charge to put up a specific set of buildings—slipped 0.3 percent.

As in previous months, price patterns for key construction inputs varied widely in April. Price changes for the month ranged from increases of 15.3 percent for liquid asphalt and 3.6 percent for steel mill products to a decrease of 5.9 percent for asphalt paving mixtures and blocks.  

In addition, a diverse range of input prices continued to rise at double-digit cost increases compared to a year ago. Prices jumped 13.7 percent year-over-year for cement, 13.3 percent for electrical switchgear, 13.2 percent for concrete products, and 12.1 percent for gypsum building products.

Association officials said the Administration’s approach to new Buy America rules is contributing to higher materials prices by limiting what materials contractors can use and sowing confusion among state and local officials responsible for enforcing the new measure. They noted that the administration’s vague and conflicting guidance on what constitutes an American made product is adding to the problem.

“The Biden administration has opted to define the new Buy America rules in a way that leaves no flexibility but causes lots of confusion,” said Stephen E. Sandherr, the association’s chief executive officer. “As a result, public officials are being both overly restrictive and overly cautious in signing off on the materials contractors can use, which adds to the cost of many materials.”

View producer price index data.