By KERRY SMITH, EDITOR, ST. LOUIS CONSTRUCTION NEWS AND REVIEW MAGAZINE
October 2022 national data reflects a sharp rise in bid prices as contractors continue navigating ongoing supply chain challenges, labor costs and more.
The Associated General Contractors of America Chief Economist Ken Simonson says rising construction costs continue threatening to undermine demand for projects. He urges administration officials to remove remaining tariffs on construction materials and to boost investments in construction-focused education and training.
“Although some material costs have moderated, other costs are still climbing regularly while contractors are incurring added expenses from delays caused by supply chain disruptions, shortages of skilled labor and rising interest rates,” Simonson said. “Some owners may delay or cancel projects as the price to complete them continues to increase, threatening to undermine overall demand.”
A 3 percent jump in the producer price index for new commercial construction – the measure of what a fixed group of contractors estimate they’d charge to build a specific set of nonresidential projects – occurred from September 2022 through October 2022. Over the past 12 months, the PPI increased 11.2 percent and 20.2 percent over the 24-month span from October 2020 through October 2022.
Simonson added that the input price, however, does not capture contractors’ added costs from materials that are not delivered on schedule. It also doesn’t include rising wage rates and overtime pay, nor does it factor in the financial costs associated with delays.
Several material categories posted double-digit spikes in October as compared with 12 months earlier. The PPI for diesel fuel soared 9.8 percent for the month and 61.5 percent year over year. The index for cement, Simonson says, rose by 2.5 percent last month, bringing the year-over-year increase to 13.4 percent. And the index for architectural coatings – such as paint – surged 1.1 percent for the month and a whopping 27.5 percent over 12 months.
“Tariffs and regulations are making construction more expensive,” said AGC of America CEO Stephen Sandherr. “If left unchecked, they will undermine private-sector demand for projects and limit the impacts of new infrastructure investments.”