AGC reports that higher prices are squeezing margins for many construction firms.
According to the Associated General Contractors of America (AGC), prices for construction materials jumped in February, driven by extreme increases in items used in new housing and nonresidential building renovations. In a release, the AGC notes that the increased materials prices are hitting contractors still struggling to recover from a years-long downturn in construction demand.
“For the second month in a row, contractors endured outsized price hikes for gypsum wallboard, lumber and insulation materials,” says Ken Simonson, chief economist for the AGC. “In addition, soaring diesel prices mean contractors are paying more for fuel they buy and, via fuel surcharges, for the thousands of deliveries of materials and equipment required for construction projects.”
The producer price index for all construction inputs increased by 1.3 percent between January and February, equaling the entire increase for 2012, Simonson notes. The index was 2 percent higher than in February 2012, outpacing the increase in the price contractors are able to charge for most types of new buildings. The index for new office construction rose only 1 percent in the past year; new school buildings 1.2 percent; new industrial construction, 1.3 percent; and new warehouses, 2.6 percent.
The producer price index for gypsum products such as wallboard and plaster climbed 4.4 percent in February, following an 11.8 percent leap in January, for a cumulative rise of 17.8 percent over the past 12 months, Simonson notes. Lumber and plywood prices rose 2.3 percent in February and 15.8 percent from a year ago. Insulation prices increased 2.1 percent and 5.9 percent, while the price index for diesel fuel shot up 7.2 percent for the month and 3.8 percent year-over-year.