Prices on the rise
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Construction materials prices rise amid supply, labor issues

The Associated General Contractors of America is urging federal officials to take additional steps to ease supply chain disruptions.

February 16, 2022

The Associated General Contractors of America (AGC), Arlington, Virginia, says prices of construction materials jumped more than 20 percent from January 2021 to January 2022, according to an analysis of government data recently released. The analysis is part of the association’s Construction Inflation Alert, a report for project owners, officials and others about the challenges volatile materials costs, supply chain disruptions and labor shortages posed for construction firms. 

“Unfortunately, there has been no letup early this year in the extreme cost runup that contractors endured in 2021,” says Ken Simonson, AGC chief economist. “They are apparently passing on more of those costs but will have a continuing challenge in getting timely deliveries and finding enough workers.” 

According to the analysis, the producer price index for inputs to new nonresidential construction has increased by 2.6 percent from December to January and by 20.3 percent over the past 12 months. In comparison, the index for new nonresidential construction, a measure of what contractors say they would charge to erect five types of nonresidential buildings, climbed by 3.8 percent from the previous month and 16.5 percent year over year. 

Simonson says prices increased for various reasons last year: 

  • The price index for steel mill products increased 112.7 percent over 12 months, despite declining 1.6 percent in January.
  • The index for plastic construction products climbed 1.8 percent for the month and 35 percent over 12 months.
  • The index for diesel fuel jumped 5.1 percent in January and 56.5 percent for the year. 
  • The index for aluminum mill shapes jumped 5.6 percent in January and 32.7 percent over 12 months, while the index for copper and brass mill shapes rose 4.1 percent in January and 24.8 percent over the year.
  • Architectural coatings such as paint had an unusually large price gain of 9 percent in January and 24.3 percent over 12 months. 
  • The index for lumber and plywood leaped 15.4 for the month and 21.1 percent year-over-year.,  
  • Other inputs with double-digit increases for the past 12 months include insulation at 19.2 percent, trucking at 18.3 percent and construction machinery and equipment at 11.4 percent. 

As a result, AGC officials say construction firms are being squeezed by increased costs for materials and labor shortages. Now, they are urging federal officials to take additional steps to address supply chain disruptions and rising materials prices. These include continuing to remove costly tariffs on key construction components. 

“Spiking materials prices are making it challenging for most firms to profit from any increases in demand for new construction projects,” says Stephen E. Sandherr, AGC chief executive officer. “Left unabated, these price increases will undermine the economic case for many development projects and limit the positive impacts of the new infrastructure bill.” 

For more information, view producer price index data here, charts of the gap between input costs and bid prices here and the February 2022 Construction Inflation Alert here.