Cost of Construction Material Continues to Rise in SeptemberOctober 16th, 2012 by DWM Magazine
The cost of construction materials continues to surge from August through September, endangering contractors’ workload, according to data gathered by the Associated General Contractors of America (AGC). Despite minimal price changes from the previous year, the recent spike in the Producer Price Index for inputs to construction increased 0.9 percent in both August and September.
“I don’t think the prior months will affect our industry negatively,” says Andy Gum owner of Thomas Glass Company Inc. in Columbus, Ohio. “I think prices have been depressed for quite some time.”
In months prior, the cost of construction displayed declining prices affecting the year-over-year change at 1.7 percent. The index also reported the prices contractors would charge for their work remained stagnant.
“The latest surge in materials costs may push subcontractors and some general contractors into insolvency, following years of razor-thin margins and shrunken levels of activity,” says Ken Simonson, chief economist for the AGC. “Most contractors have no ability to pass on unexpected cost increases.” Following the opposite suite in August to September, the index for new industrial buildings fell 0.2 percent and new school construction also decreased 0.1 percent for the month. New office and warehouse construction indexes remained unaffected. According to the AGC, below average public investment in infrastructure is a leading explanation as to why contractors are unable to recover costs. Some contract glaziers, such as Gum, say they expect more increases to come.
“I believe there will be an increase in prices because capacity from our manufacturers has decreased so much that they are quickly exceeding capacity as the economy begins to strengthen,” says Gum. “I think we will see prices continue to rise.”