AGC: Construction material prices drop
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 conditions.”
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.
“Construction 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.”
“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 conditions.”
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.
“Construction 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.”
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