Rising costs for construction materials may once again impact projects

Employment gains in the construction industry could be undermined if another round of materials cost increases and delayed shipments cause owners to postpone or cancel projects.

The Associated General Contractors of America noted one of the contributing factors to rising materials prices was the Russian invasion of Ukraine, which was hard to predict. However, they urged federal officials to continue to work to unsnarl supply chains and supply disruptions. They also urged public officials to give contractors greater flexibility in adjusting their prices to address recent, abrupt spikes in costs for key construction materials, like diesel fuel.

“Construction is doing well at the moment in most states, but fast-rising costs may cause some owners to cancel planned projects,” said Ken Simonson, the Associated General Contractors of America Chief Economist. “In addition, production and shipping delays are likely to slow down projects and the hiring associated with them.”

On March 15, the AGC published a blog that looked at the producer price index for new nonresidential construction, which rose 17 percent between February 2021 to February 2022.

During that same period, the price of construction materials used in new nonresidential construction jumped more than 21 percent. The association noted the more recent price announcements made after the February data was collected suggest contractors are experiencing greater cost pressures this spring than last year.

Simonson pointed out that while the blog was published on March 15, the data was only reflective of the initial days of the war in Ukraine.

“Since the time these prices were collected, multiple increases have taken effect for metals, fuel and trucking, while supply chains have become even more snarled,” he added.

“Construction firms won’t be able to keep adding jobs in most parts of the country if rising materials prices turn every successful project into a financial loss,” said Associated General Contractors of America Chief Executive Officer Stephen E. Sandherr. “Getting our supply chain moving efficiently again won’t be easy, but it is essential to the strength of the construction sector and the overall economy.”

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