ConDig (10-Aug-18). Construction costs were flat in July this year compared with the month prior, but industry chiefs continue to warn that months of sharp increases are squeezing contractor profit margins.
The producer price index for inputs to construction industries — a weighted average of all goods and services used in construction — was unchanged from June to July but has surged 8.1% since July 2017, according to the Associated General Contractors of America’s (AGC) analysis of Labor Department data.
Diesel fuel, metals and wood products were the major contributors to the large year-over-year cost increases, with the producer price index rising 43.6% for diesel fuel; 17.8% for aluminum mill shapes and 12.4% for steel mill products.
It comes as costs for lumber and wood plywood have jumped up 16.3%, while the price index for truck transportation of freight climbed 8.2% over the year.
“Steel, aluminum and Canadian lumber are all subject to stiff new tariffs, with the prospect that prices will soon rise even more for these and other goods used in construction,” said the association’s chief economist, Ken Simonson.
“In addition, the cost of delivering goods and equipment to construction sites, operating diesel-powered equipment, and hauling away dirt, debris and equipment is affected by fast-rising prices for fuel and trucking services.”
The hike in construction costs comes as President Trump rolled out a 25% tariff on imported steel and a 10% duty on aluminum from Canada, Mexico and the European Union on May 31.
Lumber prices have jumped more than 30% this year to reach their highest level on record in the wake of US duties on imports from Canada, which have squeezed supplies and boosted home-construction costs.
“Although price changes for construction materials in July were mixed, contractors are likely to be hit with additional cost increases as new tariffs take hold and stocks of items purchased before the tariffs are used up,” Simonson added.
In June, AGC warned that construction costs were set to rise further as tariffs on steel and aluminum are set to take effect.
AGC also said in March that the roll out of US import tariffs on steel and aluminum could result in the loss of 30,000 jobs in the construction industry as contractors will be forced to absorb increased costs.