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Producer Price Index Figures Show Higher Costs for Construction Materials

Oct 27, 2009 2:17 PM

Construction costs, which had been relatively low for much of the past year, are beginning to climb at an increasing rate, signaling the end to the limited-time sale for construction, according to a new analysis of the latest producer price index released recently by the U.S. Bureau of Labor Statistics. The analysis by Ken Simonson, chief economist for the Associated General Contractors of America (AGC), Arlington, Va., found significant upward movements between August and September 2009 in the prices of copper (10%), aluminum (2%), and steel (3%). The construction economist added that since the prices were collected a month ago, copper, aluminum, and diesel fuel have moved to multi-month highs. “The days of construction estimates coming in 20% under estimate may soon be coming to an end," says Simonson. "These figures serve as an important reminder that governments and developers looking for a good deal on construction should act quickly before having to pay significantly more for their projects."

Simonson added that prices for other significant construction materials also rose in September as compared to the previous month. For example, the cost of plastic construction products rose 1.2%, the cost of prestressed concrete products by 1.5%, and iron and steel pipe and tube by 1.2%. Some construction materials prices did continue to decline, such as gypsum (down 1.2%) and plywood (down 0.3%.)

Simonson said the producer price data serves as a reminder that “private owners and public agencies should accelerate any plans they have for construction to take advantage of materials costs that remain generally below year-ago levels but which are rapidly reversing their slide."

The latest producer price index figures are available on the AGC Web site.

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