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Bid Prices Increase in October from Wages, Delivery Delays, Diesel Costs

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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.”

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Construction Employment Stalls in April, Materials Costs Rise Again, Inventories Shrink

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By KERRY SMITH, EDITOR, ST. LOUIS CONSTRUCTION NEWS AND REVIEW MAGAZINE

The level of construction employment remains virtually unchanged in St. Louis and across the U.S. as commercial and residential contractors contend with a prolonged scarcity of able workers and a still-choked building materials supply chain.

Associated General Contractors of America Chief Economist Ken Simonson says finding enough workers continues to be a feat, as reflected in workforce statistics from April. Augmenting the people shortage, he adds, are problems in getting stable prices and reliable deliveries of key materials.

“Contractors are experiencing unprecedented intensity and range of cost increases, supply-chain disruptions and worker shortages that have kept firms from increase their workforces,” said Simonson. “These challenges will make it difficult for contractors to rebound as the pandemic appears to wane.”

Construction employment in the U.S. during April totaled 7.45 million, matching March’s level but 2.6 percent below the most recent peak in February 2020. Simonson said the number of former construction workers (768,000) who were unemployed in April dropped by half from one year ago, and the sector’s unemployment rate fell from 16.6 percent in April 2020 to 7.7 percent last month.

“The fact that (construction) employment has stalled – despite strong demand for new homes, remodeling of all types and selected categories of nonresidential categories – suggests that contractors can’t get either the materials or the workers they need,” Simonson said, noting that many firms are reporting backlogs and rations of key materials.

Still in short supply, according to the Institute for Supply Management’s latest survey report, are steel and steel products (for five months now), PVC products (a three-month shortage), lumber and circuit breakers.

Price spikes continue relative to copper, wire, oriented strand board, lumber, wood products, resin products, PVC products, steel, diesel, aluminum, vinyl windows and roof shingles.

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