The amount contractors pay for some key construction materials declined in August, but the Associated General Contractors of America said contractors are still feeling squeezed. The AGC released an analysis of producer price index figures and found that material cost increases have outstripped the price of finished buildings over the past year.
“The disparity between contractors’ materials costs
and their selling prices threatens to push some firms and their hard-pressed
workers out of business,” said Ken Simonson, the association’s chief economist.
“Contractors just aren’t catching any breaks when it comes to current market
Simonson noted that the monthly decrease in the
materials index and its longer-term increase were the result of sharp price
movements for a range of key construction materials. Those materials include
diesel fuel, which was down 6.2 percent for the month and up 32.9 percent for
the year; steel, which was down 1 percent for the month and up 14.3 percent for
the year; and copper, which was down 3.3 percent for the month and up 21
percent for the year.
The construction economist added that
prices were likely to remain volatile for the foreseeable future based on
changes in broad-based global demand.
“At best, contractors
may get more short-term relief in the next few months, but they remain vulnerable
to unpredictable price spikes, which can hit several materials at once and
jeopardize firms’ viability,” he said.
Simonson noted that
the index for new construction – what contractors charge for construction
projects – was unchanged from the previous month for all building types except
new industrial buildings, which declined by 0.2 percent. He added that annual
increases in new construction prices, which ranged between 2.1 and 3.2 percent,
paled in comparison to the annual increase in costs for many key building
materials, forcing contractors to absorb the difference.
firms are paying more for materials and charging less for their work, even as
they chase a diminishing number of projects,” said the association’s chief
executive officer, Stephen E. Sandherr. “Without a significant change in market
conditions soon, this industry is going to continue to struggle to add jobs for
the foreseeable future.”
AGC: Construction material prices drop
September 19, 2011