In an early fall Construction Inflation Alert, Associated General Contractors of America Chief Economist Ken Simonson warned that construction material
In an early fall Construction Inflation Alert, Associated General Contractors of America Chief Economist Ken Simonson warned that construction material prices might rise another 6 to 8 percent, with periods of 10 percent increases possible. The alert was made days after Simonson, responding to new Producer Price Index data from the Department of Commerce, cited double-digit increases in concrete product and portland cement prices over the past 12 months.
The extreme cost increases or volatility of some construction inputs are proving troublesome to contractors because they have been sudden, extreme and unexpected, he says. Private owners, public agencies that do budgeting and design, and contractors should all be aware that construction materials prices are likely to keep rising at a much faster rate than the 3 to 4 percent increase in the consumer price index or broad PPI for finished goods.
According to the PPI for construction materials and components (2001-2006), average prices for all concrete products combined were up 10.4 percent as of August 2006, over prices in the same month last year. Prestressed concrete showed the greatest price gains (17.1 percent), with ready mixed concrete also ringing up a double-digit increase (11.9 percent) against August 2005 levels. Cement prices, which experienced an 11.7 percent rise in all of 2005 over the prior year, saw an 11 percent uptick in the 12 months leading up to August 2006.
Several other construction materials saw even more dramatic upswings in prices, according to the PPI, including asphalt paving mixtures and blocks (up 39 percent); steel mill products (23 percent); and gypsum products (21 percent). The only construction input to decrease in price over the past 12 months was lumber and plywood, down 6.1 percent.
| PRODUCT | CALENDAR YEAR PERCENT CHANGE | TO 08/06 OVER PAST | ||||||
|---|---|---|---|---|---|---|---|---|
| 2001 | 2002 | 2003 | 2004 | 2005 | 1 mo. | 3 mo. | 1 yr. | |
| Concrete products | 2.5 | -0.3 | 1.5 | 7.6 | 9.8 | 0.0 | 1.5 | 10.4 |
| Concrete block and brick | 2.3 | 1.6 | 3.2 | 4.7 | 8.1 | -0.1 | 1.6 | 8.2 |
| Concrete pipe | 4.4 | 1.7 | 1.4 | 5.5 | 8.6 | 0.0 | 2.3 | 4.7 |
| Ready mixed | 2.5 | -1.1 | 2.1 | 8.7 | 11.6 | 0.0 | 1.9 | 11.9 |
| Precast products | 0.7 | 0.3 | 2.5 | 6.0 | 6.4 | 0.1 | -0.1 | 6.1 |
| Prestressed concrete products | 5.3 | 1.8 | -0.2 | 8.2 | 3.8 | -0.2 | 0.2 | 17.1 |
| Brick and structural clay tile | 5.3 | 1.9 | 0.7 | 3.0 | 9.5 | -0.2 | 0.4 | 8.4 |
| Construction sand/gravel/crushed stone | 3.3 | 2.5 | 2.4 | 4.3 | 7.9 | 1.5 | 2.7 | 10.2 |
| Cement | 1.0 | 1.3 | -1.1 | 7.9 | 11.7 | 0.3 | 0.7 | 11.0 |