Statistics Say Volatile Year

LAS VEGAS - According to the Construction Inflation Alert released by the Associated General Contractors of America (AGC), nonresidential construction is expected to experience wide variance in demand, materials cost, and labor availability.

“In 2008, some nonresidential segments will continue to grow, including power and energy, but others such as lodging will slow or decline,” said Ken Simonson, AGC’s chief economist. “Diesel, copper, and steel are among materials costs likely to accelerate, while others remain benign.”

The report cautioned that the large increase in diesel fuel prices compared to a year ago will likely increase costs. What was described as a “slumping demand and rising supply of gypsum products” however, might imply that nonresidential and multi-unit residential building costs will go up a little less than 6 percent, noted the report.

“These cross-cutting trends make it likely that the PPI for construction inputs will accelerate from the 4.5 percent rate of increase that prevailed in 2006 and 2007 to a 6-8 percent range by the end of 2008,” commented Simonson.

Looking further to the future, he also noted that there are two factors making it likely that a 6-8 percent growth rate for construction input prices will be sustained. “First, many construction inputs, such as diesel fuel, steel, and copper are in demand worldwide,” he reported. “Second, construction will always be dependent on physical delivery of heavy, bulky, relatively low-value materials for which transportation and fuel costs are a major part of the delivered price.”

Labor also accounts for roughly one-half the cost of a construction project. According to the report, in 2007, despite the high level of nonresidential activity, contractors were generally able to find enough workers due to a massive redeployment of specialty trade contractors from residential to lighter nonresidential projects.

“In 2008, I expect labor shortages will worsen for a few crafts, pulling average wage rates higher, but in other segments such as residential specialty trades, the supply of some crafts will be plentiful,” noted Simonson. “Wage increases in nonresidential construction may rise to the 4.5-5.5 percent range in 2008, despite the slowdown in overall activity, and to 5-6 percent in 2009, when residential work begins to compete again for some specialties.”

For more information, visit

Publication date: 03/24/2008

Did you enjoy this article? Click here to subscribe to The NEWS Magazine

You must login or register in order to post a comment.



Image Galleries

2015 AHR Expo

Photos from the 2015 AHR Expo at McCormick Place in Chicago.

Posted: February 19, 2015


NEWSMakers: Andy Patron
Andy Patron, partner with FMI Corp., discusses the impact a national labor shortage may have on the mechanical contracting industry. Posted on March 27.
More Podcasts


NEWS 03-30-15 cover

2015 March 30

Check out the weekly edition of The NEWS today!

Table Of Contents Subscribe

HVAC Trends

The NEWS regularly reports on HVAC industry trends in our weekly issues. What trends do you see?
View Results Poll Archive


2015 National Plumbing & HVAC Estimator

Every plumbing and HVAC estimator can use the cost estimates in this practical manual!

More Products

Clear Seas Research


Clear Seas ResearchWith access to over one million professionals and more than 60 industry-specific publications, Clear Seas Research offers relevant insights from those who know your industry best. Let us customize a market research solution that exceeds your marketing goals.


Magazine image
Register today for complete access to Get full access to the latest features, Extra Edition, and more.


facebook icontwitter iconyoutube iconLinkedIn i con