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Record Jump In Materials Prices And Supply Chain Disruptions Threaten Construction Firms’ Ability To Complete Vital Nonresidential Projects

April 9, 2021

New Producer Price Index Data Shows Costs Outstripping Contractors’ Bid Prices as Firms Cope with Growing Delivery Delays, Limited Supplies of Key Items; Association Urges Relief from Tariffs

An unprecedented leap in the price of goods used in construction and supply-chain disruptions are wreaking hardships on contractors and slowing projects, according to an analysis by the Associated General Contractors of America of government data released today. The association posted a Construction Inflation Alert  to update contractors and their clients about the latest developments.  Association officials urged the Biden administration to end a variety of tariffs and quotas on imported construction inputs and to help ease domestic supply-chain problems.

“Today’s producer price index report documents just some of challenges contractors are experiencing with fast-rising materials costs, lengthening or uncertain delivery times, and rationing of key inputs,” said Ken Simonson, the association’s chief economist. “These problems threaten to drive up the cost and completion time for many vital projects and potentially set back the recovery in construction employment.”

Prices for materials and services used in construction and contractors’ bid prices both declined at the beginning of the pandemic but have diverged in the past year, Simonson said. A government index that measures the selling price for goods used construction jumped 3.5 percent from February to March and 12.9 percent since March 2020. Both the monthly and yearly increases were the highest recorded in the 35-year history of the series, he noted. Meanwhile, the producer price index for new nonresidential construction—a measure of what contractors say they would charge to erect five types of nonresidential buildings—increased only 0.5 percent last month and 1.7 percent over the past 12 months.

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