Spokane Journal of Business

Some construction materials rise in cost, AGC reports

Gypsum products, diesel among those goods that are increasing in price

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The cost of key construction materials increased in August and in a year-to-year comparison, resuming a trend that has forced contractors to pay more for materials even as competitive pressures restrain prices for finished projects, says an analysis of federal figures released earlier this month by the Associated General Contractors of America.

"After years of depressed construction activity, the last thing contractors need is to see materials price increases further erode their already slim margins," says Stephen E. Sandherr, the association's chief executive officer. "This isn't the kind of economic recovery most contractors spent the past few years praying for."

The producer price index for inputs to construction—covering materials that go into every type of project, plus items consumed by contractors such as diesel fuel—increased 0.9 percent in August and 1.0 percent from a year earlier, Sandherr says. The price increases resume a longer-term trend that is forcing contractors to pay more for materials even as they struggle to raise prices for finished projects, he says.

Sandherr says rising prices for several key construction materials produced the latest monthly and year-to-year increases. The price index for diesel fuel jumped 8.7 percent in August and 5.2 percent from a year ago. Prices for gypsum products are up 17.8 percent compared with August 2011 and up 0.3 percent compared with July 2012. The index for architectural coatings, while unchanged compared with July, is up 11.7 percent from a year earlier. Lumber and plywood costs increased by 2.3 percent in August and are up 6.9 percent compared with August 2011.

A few materials posted substantial declines for the month and year, Sandherr adds. Prices for copper and brass mill shapes dropped 1 percent for the month and are now down 14 percent from a year earlier. The index for steel mill products fell by 2.5 percent compared with July and is down 8.2 percent compared to August 2011. And the price for aluminum mill shapes is down 0.7 percent for the month and 9.8 percent compared with the same point last year.

The price indexes for finished nonresidential buildings, which measure what contractors estimate they would charge to put up new structures, were mixed for the month and up only slightly from a year earlier, Sandherr says. The index for new industrial buildings was unchanged compared with July, but up 1.9 percent from the previous August. The index for new office construction also was unchanged for the month but climbed 2.4 percent for the year. The index for new school construction declined by 0.1 percent in August, but is still up 3.1 percent from a year ago. The price for new warehouse construction rose 0.3 percent in August and 3.8 percent from a year ago.

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