Construction prices for non-residential buildings increase by 23% year-on-year

Diving letter:

  • The input prices for non-residential construction have risen by 23.4% last year since then, according to Associated Builders and Contractors analysis of US Bureau of Labor Statistics data released Aug. 12.
  • For July, input prices for non-residential construction rose 0.8% from the previous month, ABC said.
  • While softwood prices have fallen 29% since last month, the cost of other types of products used in construction has continued to rise. Energy prices have seen significant year-over-year increases, with natural gas prices increasing 146.7% and crude oil and unprocessed energy materials increasing 102.9% and 93.8%, respectively. The prices for steel mill products, which rose by 10.8% in July alone, rose by 108.6% over the course of the year.

Dive Insight:

ABC chief economist Anirban Basu pointed to several reasons for the escalation, including a recovering economy, persistent supply chain disruptions and limited manufacturing capacity.

“Many economists insist that the current situation is only temporary; Still, today’s wholesale price hikes can have a significant impact on contractors’ wealth by reducing margins and delaying the start of projects, “he said in a press release.

Low interest rates mean more money is being invested in real estate, which is often reflected in construction projects, he said. However, this liquidity also serves to drive prices up.

material 12 months change
Plumbing fixtures and fittings 3.5%
Concrete products 4.5%
Prepared asphalt, tar roof and siding products 10.9%
Manufactured structural metal products 28.8%
Non-ferrous wire and cable 31.5%
Coniferous wood 45%
iron and Steel 89.2%
Unprocessed energy materials 93.8%
crude oil 102.9%
Steel mill products 108.6%
natural gas 146.7%

SOURCE: ABC analysis of producer price index data

“One can only conclude that despite the vicious effects of the delta variant, the economy will continue to run hot through 2022, bringing with it both strong growth in gross domestic product and unusually high inflation,” said Basu.

Rising steel prices are an indication not only of the recovery in goods-producing industries such as construction and manufacturing, but also of the difficulty global suppliers are having in keeping up with demand, he said.

“These dynamics don’t seem to change much in the near future, although the latest consumer price index report gave some evidence of moderate inflation,” he said.

He warned contractors not to include contingencies in their contracts to protect themselves from additional material price spikes. Given the high demand for services from construction companies, in most cases contractors should have enough room for maneuver to achieve this, he added.

High prices have angered contractors since the COVID-19 pandemic began, and like Basu, many believe they will continue in the near future. For example Mike, CEO of the Gilbane Building Company McKelvy told Construction Dive that he believes he will face high material costs for months, which will result in customers likely to pause or cancel orders.

Nonetheless, McKelvy said, much of the work companies like Gilbane are doing today involves material prices that were locked in before they skyrocketed to where they are now. As a result, high material prices will have a bigger impact on the work that will be advertised this year, he said and will spread through 2023.

“I believe [the construction] The industry expected a two-year recovery. The supply chain was also seeing a slow recovery, “McKelvy said.” What we have had is a much faster recovery and this has put the supply chain under really heavy pressure. “

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