Currently Reading

Proliferating materials price increases and supply chain disruptions squeeze contractors and threaten to undermine economic recovery

Market Data

Proliferating materials price increases and supply chain disruptions squeeze contractors and threaten to undermine economic recovery

Producer price index data for April shows wide variety of materials with double-digit price increases.

By AGC | May 13, 2021

The cost of goods and services used in construction accelerated further in April as more items logged double-digit increases over the past year, according to an analysis by the Associated General Contractors of America of government data released today. Meanwhile, nonresidential contractors struggled with delays in receiving materials and intensifying competition that limited their ability to pass on higher costs. Association officials urged the Biden administration to quickly roll back tariffs and quotas on imported construction materials that are adding to costs and availability problems.

“Today’s producer price index report—bad though it is—actually understates the severity of the problems contractors are experiencing,” said Ken Simonson, the association’s chief economist. “Many items have posted even steeper price increases since the data for this report were collected in mid-April, while lead times for producing goods and delivery times to distributors and worksites have grown ever longer and less certain.”

Prices for materials used in construction jumped 19.7% from April 2020 to last month. That was by far the largest increase in the 35-year history of the series, Simonson said. A series that includes services as well as goods purchased by contractors increased nearly as much, 19.1%. Meanwhile, 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 2.3% over the past 12 months, as competition for a shrinking pool of new projects forced contractors to absorb most of the increases.

Items with especially steep price increases over the past year ranged from lumber to metals to plastics. The producer price index for lumber and plywood soared 85.7% from April 2020 to last month. The index for steel mill products climbed 67%, while the index for copper and brass mill shapes rose 49% and the index for aluminum mill shapes increased 20.5%. The index for plastic construction products rose 14.2% amid growing scarcity of items such as PVC pipe, vinyl siding and moisture barriers, and resins used in paints and adhesives. The index for gypsum products such as wallboard climbed 12.1%.

Association officials said some of the supply chain problems have resulted from the pandemic or one-time events like the freeze in Texas last February that damaged plants producing inputs for construction plastics. But they added that federal policies, particularly tariffs and quotas on key building materials like lumber, steel, and aluminum have exacerbated the price spikes, supply shortages, and delivery delays. They urged the administration to end those import obstacles and explore ways to help uncork supply-chain bottlenecks.

“The Biden administration must address these unprecedented lumber and steel costs and broader supply-chain woes or risk undermining the economic recovery,” said Stephen E. Sandherr, the association’s chief executive officer. “Without tariff relief and other measures, vital construction projects will fall behind schedule or be canceled.”

View producer price index data. View chart of gap between input costs and bid prices. View AGC’s Construction Inflation Alert.

Related Stories

Market Data | Sep 15, 2021

ABC’s Construction Backlog Indicator plummets in August; Contractor Confidence down

ABC’s Construction Confidence Index readings for sales, profit margins and staffing levels all fell modestly in August.

Market Data | Sep 7, 2021

Construction sheds 3,000 jobs in August

Gains are limited to homebuilding as other contractors struggle to fill both craft and salaried positions.

Market Data | Sep 3, 2021

Construction workforce shortages reach pre-pandemic levels

Coronavirus continues to impact projects and disrupt supply chains.

Multifamily Housing | Sep 1, 2021

Top 10 outdoor amenities at multifamily housing developments for 2021

Fire pits, lounge areas, and covered parking are the most common outdoor amenities at multifamily housing developments, according to new research from Multifamily Design+Construction.

Market Data | Sep 1, 2021

Construction spending posts small increase in July

Coronavirus, soaring costs, and supply disruptions threaten to erase further gains.

Market Data | Sep 1, 2021

Bradley Corp. survey finds office workers taking coronavirus precautions

Due to the rise in new strains of the virus, 70% of office workers have implemented a more rigorous handwashing regimen versus 59% of the general population.

Market Data | Aug 31, 2021

Three out of four metro areas add construction jobs from July 2020 to July 2021

COVID, rising costs, and supply chain woes may stall gains.

Market Data | Aug 24, 2021

July construction employment lags pre-pandemic peak in 36 states

Delta variant of coronavirus threatens to hold down further gains.

Market Data | Aug 17, 2021

Demand for design activity continues to expand

The ABI score for July was 54.6.

Market Data | Aug 12, 2021

Steep rise in producer prices for construction materials and services continues in July.

The producer price index for new nonresidential construction rose 4.4% over the past 12 months.

More In Category

Magazine Subscription

Get our Newsletters

Each day, our editors assemble the latest breaking industry news, hottest trends, and most relevant research, delivered to your inbox.


Follow BD+C: