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The price of materials and services used in nonresidential construction inched up 0.2 percent from June to July, while a government index that measures contractors’ bid prices fell by 1.4 percent, according to an analysis by the Arlington, Virginia-based Associated General Contractors of America (AGC).
AGC officials say contractors are finally seeing relief from recent supply chain problems and price escalations, but the competitive market means key materials still are very hard to find.
The initial price shock from the COVID-19 pandemic and Russia’s attack on Ukraine has faded; however, long lead times remain for electrical equipment and construction machinery. Cement, lumber, plywood and asphalt coatings are some of the materials showing persistent price increases, despite better planning.
The producer price index (PPI) for new nonresidential construction—a measure of what contractors report they would charge to put up a specific set of buildings—fell 1.4 percent in July, the AGC says.
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Prices for most major construction inputs were stable or declined in July. Some of the greatest declines include steel mill products dropping 7.6 percent and fabricated structural metal, down 6.4 percent. While diesel prices rose from $3.767 on July 3 to $4.239 on Aug. 7, according to the U.S. Energy Information Administration, the AGC notes in its PPI data that prices are down year over year.
However, the Associated Builders and Contractors of America (ABC) Chief Economist Anirban Basu says energy prices are likely to remain volatile and equipment prices continue to rise.
“With the exception of energy prices, which are heavily influenced by a cocktail of geopolitics, weather and investor frenzy, construction materials prices should be reasonably stable during the months to come,” Basu says. “One exception may be construction equipment prices. The price of equipment expanded nearly 2 percent on a monthly basis in July and nearly 10 percent over the past year. Many contractors continue to complain about lengthy lead times for equipment as the nation continues to expand spending on infrastructure.”
Natural gas prices were up 11 percent in July, while crude petroleum and unprocessed energy materials prices increased 8.4 percent and 8 percent, respectively, the ABC says.
AGC officials say equipment prices are not likely to decline anytime soon, due to the Buy America requirements that are part of the Bipartisan Infrastructure Law. The new rules will limit the supply of materials contractors can use and increase the costs of those products as the guidance goes into effect. The AGC says that the new requirements are so strict that many products currently made in the U.S. would not be compliant due to containing small components that are sourced from abroad.
“Federal officials continue to inhibit the ability of contractors to utilize an established diversified construction material supply chain by drumming up strict regulations,” AGC CEO Stephen E. Sandherr says. “Infrastructure is needed now, and until we have the capability of keeping all manufacturing on U.S. soil, we need to take advantage of all resources available.”
