Cost of Building Materials Increase

Construction materials prices rose in July in spite of an easing in price increases elsewhere in the industry, a trade group reported. Price increases for materials and components for construction rose 7 percent in the month, compared to a 3 percent rise in June, while the prices for finished goods rose only 1 percent, according to The Associated General Contractors of America reporting on the most recent statistics from the Bureau of Labor Statistics. “Since July 2005, the overall PPI has risen 4.2 percent while the construction materials index climbed twice as fast, rising 8.3 percent,” said Ken Simonson, chief economist for the AGC. Simonson said the gap is even more significant because, while prices for lumber and plywood have fallen, those materials make up a very small percentage of the cost of nonresidential construction. Over the past 12 months, materials including pipe, wiring and faucets have risen 88 percent, wallboard has increased 23 percent and PVC-based products have jumped 20 percent, Simonson said. “Furthermore, the PPI for diesel fuel which affects the cost of running off-road equipment, construction vehicles and fuel surcharges for delivering materials to job sites spared 26 percent over 12 months,” Simonson said. “That means the delivered costs of many materials have gone up even more than their prices at the producer’s point of sale, which is what the PPI measures.”