Construction materials costs are outpacing overall consumer and producer prices by a wide margin, according to the Associated General Contractors of America.
Ken Simonson, AGC chief economist, said the association's producer price index plunged 1.4 percent in February, but the PPI for construction costs rose 0.3 percent. Simonson recently issued an updated analysis of construction material costs in the latest version of the AGC's "Construction Inflation Alert."
According to AGC, it shows that with a generally strong outlook for construction, materials prices are likely to rise faster than the overall rate of consumer or producer prices again in 2006.
In the report, Simonson says, "The rate of increase for construction materials and components prices could be closer to the 10.1 percent rate of 2004 than the 6.1 percent rate of 2005. Once again, however, prices are likely to vary greatly by type of material and project."
Simonson also added that oil and natural gas prices have fallen sharply from their post-hurricane highs; however, production from the Gulf of Mexico is still down by more than 15 percent.
"As of mid-March," he said, "the national average retail price of diesel fuel was around $2.55 per gallon - 60 cents below the record set after Rita, but 35 cents higher than a year ago.
"It appears diesel prices for 2006, as a whole, will be up 10 to 30 percent over 2005, with wide month-to-month variation," said Simonson.
He also added that asphalt prices will be elevated and may go higher by year's end, while products that rely on natural gas are likely to rise by 5 percent to 10 percent.
Simonson also predicted "that rebuilding from hurricanes Katrina, Rita and Wilma is not likely to have much impact on national markets for material or labor, but will apparently be very protracted, and the overall level of construction in Louisiana will probably remain below pre-hurricane levels for several months."
Material costs outpace consumer costs, says AGC
May 5, 2006