Material Costs Outrun Finished Building Prices in June

Construction costs again outpaced other producer prices in June, but contractors remained unable to recoup the costs through higher bid prices, according to an analysis of producer price index figures released by the Associated General Contractors of America (AGC). Association officials says the ongoing cost squeeze will put new pressure on construction firms to reduce staff and possibly close.

“Despite a one-month dip in the prices of some key materials in June, construction costs rose on a year-over-year basis at the highest rate since 2008,” says Ken Simonson, the association’s chief economist. “Worse, prices are rising amid continued layoffs and construction spending levels that hit an 11-year low in May.”

Simonson notes that the producer price index for all construction materials inched down 0.1 percent in June, but increased 8.3 percent during the last 12 months, whereas the index for finished goods fell 0.7 percent for the month (0.4 percent, seasonally adjusted), and climbed 7 percent during 12 months. Meanwhile, the price of finished buildings was unchanged in June and rose only 2 percent or less during the last year, depending on building type.

Simonson says outsized, year-over-year price increases for construction were attributable to the indexes for diesel fuel and metals. The index for diesel rose 1.4 percent in June and 50 percent since June 2010. Among key metals, prices for copper and brass mill shape climbed 0.4 percent and 26 percent, respectively; aluminum mill shapes rose 0.4 percent and 17 percent; and steel mill products dropped 1.7 percent in the latest month but increased 7.0 percent from a year earlier.

“All of these materials are in worldwide demand, with supplies that are either tight or threatened by international turmoil,” Simonson says. “In contrast, materials that go strictly for construction have dropped in price as demand remains weak.”

He cites as examples the price indexes for gypsum products such as wallboard, which fell 2.8 percent in June and 7.4 percent during 12 months; lumber and plywood, 0.9 percent and 4.1 percent; and concrete products, 0.1 percent and 0.2 percent.

Association officials say that, given the continued economic pressures on the construction industry, Congress and the White House should reconsider planned cuts for infrastructure maintenance that will only increase taxpayer burdens over the long-term.

“Allowing our highways, bridges and public structures to degrade will make matters worse for the construction industry and force taxpayers to pay more to fix broken buildings and infrastructure,” says Stephen E. Sandherr, CEO of the AGC.

View the latest producer price index tables for construction.

CONEXPO-CON/AGG & IFPE 2011 a Huge Success

The mood was overwhelmingly positive at the CONEXPO-CON/AGG and IFPE 2011 expositions held March 22-26 in Las Vegas. Despite continued uncertainty in U.S. construction markets and the overall economy, industry professionals expressed hopeful optimism for a sustained U.S. upturn in the coming months, while global sales continue to be strong.

CONEXPO-CON/AGG and IFPE 2011 attracted nearly 120,000 registered attendees; the shows were the global industry gathering place for the year and the largest gathering in North America since 2008 for the construction, construction materials and fluid power/power transmission/motion control industries. The shows were held at the Las Vegas Convention Center.

A record number of more than 860 co-located events, educational programs and pre-planned meetings were held with the shows, plus dozens more meetings scheduled onsite. Co-locations included ICON Expo for the concrete products industry and several annual conferences of national industry associations.

Quality Attendance, International Scope

International registrations accounted for a record 24 percent of the total, representing more than 150 countries. CONEXPO-CON/AGG 2011 and IFPE 2011 were among a select group invited to participate in the U.S. Department of Commerce International Buyer Program, which facilitates the participation of international visitors. The shows hosted 42 official international customer delegations from 37 countries, organized by the U.S. Department of Commerce as well as in-country associations and related groups.

On the Show Floor

More than 2,400 exhibitors occupied 2.34 million net square feet of exhibit space. IFPE was the largest ever, and CONEXPO-CON/AGG’s exhibit space was the second largest in the show’s history.

Reinforcing the global scope of the shows were 10 international exhibit pavilions - IFPE with pavilions from China, Italy and Taiwan, and CONEXPO-CON/AGG with pavilions from China, Finland, Germany, Italy, Korea, Spain and United Kingdom.

IFPE 2011 featured exhibit pavilions from the American Gear Manufacturers Association (AGMA) and the Power Transmission Distributors Association (PTDA), as well as an exhibit pavilion which highlights the expanded presence of sensors manufacturers at the show. CONEXPO-CON/AGG 2011 featured the IT & Business Solutions pavilion, sponsored by the Associated General Contractors of America.

Educational Opportunities

Industry-focused education was an important component of the show experience, and there were a record number of education, training and certification programs offered. More than 80 allied associations and groups were official show supporting organizations, coming from the U.S., Canada and more than a dozen countries worldwide. They promoted the shows’ value and brought qualified buyer groups to the events, and many helped develop direction and content of the shows’ education programs to ensure they met industry needs.

Looking Ahead

The next edition of the triennial CONEXPO-CON/AGG and IFPE expositions will be held March 18-22, 2014, at the Las Vegas Convention Center in Las Vegas.