Construction costs jump 12%
By Catrin Jones14 October 2022
According to an analysis of government data by the Associated General Contractors of America, the price of materials and services used in nonresidential construction jumped 12.6% in September compared to the same month last year.
Officials at the association noted that the construction industry was suffering the most from inflation, adding that new Buy America rules set to go into effect as soon as next month will only make the situation worse.
Ken Simonson, the association’s chief economist, said, “Today’s price report shows that costs for construction continue to outpace those of other industries. Furthermore, the steep runup in diesel prices in the last few weeks is likely to make projects still more expensive to complete.”
Simonson added that the producer price index for inputs to nonresidential construction – the prices charged by goods producers and service providers such as distributors and transportation firms – decreased by 0.2% from August to September but nevertheless rose 12.6% since September 2021.
The index for liquid asphalt, used in paving projects, jumped 43.3% despite an 11.8% decline last month. There were also unusually large year-over-year increases in the price indexes for gypsum products such as plastic construction products rising by 17.9%; truck transportation of freight by 16.3% and concrete products up 14.3%.
Association officials have urged the Biden Administration to reconsider plans to implement a series of new Buy America requirements associated with a host of federal infrastructure investments. They also noted that a recent survey of member firms showed most contractors will struggle to find materials under the new Buy America guidelines.
“It stands to reason that further limiting the supply of already scarce materials will lead to even more inflation in the cost of those materials,” said Stephen E. Sandherr, the association’s chief executive officer. “Imposing new Buy America requirements at a time like this will undermine the potential benefits of new federal infrastructure investments.”