Double-Digit Inflation Pervades Construction

Surging prices for diesel fuel, asphalt, steel and other materials are clobbering construction budgets, notes Associated General Contractors of America

CP STAFF

Surging prices for diesel fuel, asphalt, steel and other materials are clobbering construction budgets, notes Associated General Contractors of America Chief Economist Ken Simonson, responding to June Producer Price Index figures the Bureau of Labor Statistics released in mid-July. The PPI for inputs to construction industries Û materials used in all project types plus items consumed by contractors, such as diesel fuel Û surged 10.4 percent over the past 12 months. The pricing index for highway and street construction leaped 18.9 percent.

Bad as those figures sound, increases in asphalt and steel costs have been even worse since these prices were collected in mid-June, Simonson explains. In the first two weeks of July, asphalt prices jumped by 40 percent in several parts of the country. Prices for rebar soared $200 per ton.

Unless Congress passes additional funding in the next few weeks to keep highway construction [dollars] flowing, many states will stop awarding contracts, he adds. Other public agencies, as well as private owners, must adjust their budgets promptly to reflect the new price realities for construction.

Regarding fuel, the Energy Information Administration reported in mid-July that the average price of highway diesel hit a new record of $4.76/gallon, up 12 cents since the first of the month. These figures won’t show up in the PPI until next month, but contractors are paying them now, Simonson affirms. Suppliers have been announcing price increases for other products as well. Two gypsum makers told contractors that wallboard prices would rise at double-digit rates in each of the next three months.