Price spikes for several key construction materials in September threaten to push some contractors out of business, according to an analysis of federal figures recently released by the Associated General Contractors of America. The recent surge comes despite mild year-over-year changes in materials prices overall.
AGC Economist Ken Simonson cited rising prices for a variety of essential construction materials as responsible for the recent spike. The price index for diesel fuel jumped 5.7% in September, following a leap of 8.7% in August. Prices for copper and brass mill shapes climbed 3.6% in September. The indexes for aluminum mill shapes and lumber and plywood each rose 1.1% in the latest month, while the price of steel mill products increased 1.0%.
The producer price index for inputs to construction—covering materials that go into every type of project, plus items consumed by contractors such as diesel fuel—increased 0.9% in both September and August, while the indexes that reflect what contractors would charge for their work were largely unchanged, the economist noted. The price increases for materials follow several months of declining prices, so that the year-over-year change in the index for materials was a “deceptively mild 1.7%,” Simonson added.
In contrast, the price indexes for finished nonresidential buildings, which measure what contractors estimate they would charge to put up new structures, as well as the indexes for subcontractors’ work, were mixed for the month, Simonson noted. The index for new industrial buildings decreased 0.2% from August to September, while the index for new school construction slipped 0.1% for the month.
The indexes for new office and warehouse construction were unchanged, as were indexes reflecting prices charged by concrete, electrical and plumbing contractors for new, repair and maintenance work on nonresidential buildings. The index for roofing contractors was the only nonresidential building index to show an increase for the month: 0.3%.
“The latest surge in materials costs may push subcontractors and some general contractors into insolvency, following years of razor-thin margins and shrunken levels of activity,” said Simonson. “Most contractors have no ability to pass on unexpected cost increases.”