“Contractors are becoming more and more concerned about surging materials prices — especially metals,” said Basu. “On a year-over-year basis, iron and steel prices are up 13.5 percent, which not only impacts a contractor’s margins but could potentially diminish demand for construction services overall.”

Prices for inputs to the overall U.S. construction industry expanded 2.2 percent in May, the largest monthly increase in 10 years. Prices expanded again in June by 0.8 percent and are 9.6 percent higher than at the same time one year ago, according to recently released U.S. Bureau of Labor Statistics data.

“And not only are materials getting more expensive, so are the costs of getting materials to jobsites,” said Basu. “Despite record low unemployment in the United States, an overall lack of skilled laborers in the construction sector and downstream markets contributes to the uncertainty.

“From electricians to painters to estimators, industry leaders are growing increasingly concerned about the dearth of skilled construction professionals and how human capital shortages have trickled down the supply chain,” Basu continued. “This will not only contribute to increased compensation costs but also increased inflation and higher interest rates, which could potentially hinder both construction and real estate sector growth.”

Publication date: 7/23/2018

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