Producer Prices Rise 26 percent Year over Year
July 20, 2021
Unprecedented price increases for a wide range of goods and services used in construction pushed up contractors’ costs by a devastating 26.3 percent from June 2020 to June 2021, according to an analysis by the Associated General Contractors of America of government data. Association officials cautioned that rising materials prices are making it difficult for many construction firms to benefit from the re-opening of the economy, undermining the sector’s ability to add new, high-paying jobs.
“Contractors have been pummeled in the past year by cost increases, supply shortages, and transport bottlenecks,” says Ken Simonson, the association’s chief economist. “Meanwhile, falling demand for many types of projects meant contractors could not raise bid prices enough to recoup these expenses.”
The producer price index for new nonresidential construction—a measure of what contractors say they would charge to erect five types of nonresidential buildings—rose only 3.4 percent over the past 12 months. That was a small fraction of the 26.3 percent increase in the prices that producers and service providers such as distributors and transportation firms charged for construction inputs, Simonson noted.
In addition to increases in materials costs, transportation and fuel costs also spiked. The index for truck transportation of freight jumped 15.4 percent. Fuel costs, which contractors pay directly to operate their own trucks and off-road equipment, as well as through surcharges on freight deliveries, have also jumped.