US contractors squeezed by rising prices

By Chris Sleight15 September 2011

US consumer price inflation vs cost rises for construction inputs. SOURCE: AGC.

US consumer price inflation vs cost rises for construction inputs. SOURCE: AGC.

Input costs for contractors in the US fell -0.6% month-on-month to August. However, compared to a year ago they are up +7.9% according to data from The Associated General Contractors of America (AGC). This is the steepest rise in contractors' costs since 2005, when annual inflation for the sector was +8.2%.

The most striking rise in contractors' input costs over the last year has been diesel fuel, with a +32.9% rise in price. The industry has also seen a +14.3% increase in the cost of steel mill products, particularly hot-rolled structural steel, and copper construction products.

However, the AGC figures also show there have been some falls in prices of key products. The price of ready-mixed concrete is down -0.5% compared to a year ago, bricks and structural clay tiles are down -3.0% and pre-stressed concrete products are down -2.5%.

But on the whole contractors have seen prices for the products they buy increase. At the same time, the AGC says that prices for finished buildings and the prices subcontractors charge have only risen by between +2.1% and +3.7% over the last year. The only exception is the cost increases for concrete contractors in the non-residential sector, which have dropped their prices by -0.2%.

The largest price rise enforced by the industry is the +3.7% increase in charges from electrical contractors in the non-residential segment. As far as prices charged by contractors to clients for new buildings, the biggest rise has been the +3.2% hike in the cost of new schools, while new industrial buildings cost just +2.1% more than they did a year ago.

Commenting on the figures AGC chief economist Ken Simonson said, "The disparity between contractors' materials costs and their selling prices threatens to push some firms and their hard-pressed workers out of business. Contractors just aren't catching any breaks when it comes to current market conditions."

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