ARLINGTON, VA. — U.S. construction costs accelerated in May, with steep increases for a wide range of building and road materials, including many that are subject to tariffs that could drive prices still higher, according to an analysis of new U.S. Labor Department data released by the Associated General Contractors of America.
Association officials said in a June 13 media statement the construction industry will bear a heavy share of the tariffs’ costs.
From May 2017 to May 2018, the producer price index jumped by 17.3 per cent for aluminum mill shapes, 13.9 per cent for lumber and plywood, 13.8 per cent for copper and brass mill shapes and 10.5 per cent for steel mill products.
Other construction inputs that rose sharply in price from May 2017 to May 2018 include diesel fuel, 44.5 per cent; asphalt felts and coatings, 8.9 per cent; ready-mixed concrete, 6.5 per cent; and paving mixtures and blocks, 5.2 per cent.
The U.S. imposed steel and aluminum tariffs on imports from Canada, Mexico and the European Union on May 31.
The impact from these tariffs is not reflected yet in the most recent data.
“These increases far outstripped the 4.2 per cent rise in the price index for new construction, implying that contractors are facing a severe squeeze on costs for both ongoing and new projects,” said the association’s chief economist Ken Simonson in the statement.
“Moreover, tariffs imposed on steel and aluminum since this data was collected in mid-May are likely to drive contractors’ costs still higher.”
The producer price index for inputs to construction industries — a measure of all materials used in construction projects including items consumed by contractors, such as concrete products — rose 2.2 per cent in May alone and 8.8 per cent over 12 months. The year-over-year increase was the steepest since July 2011, the economist noted.
Even before they have taken effect, construction officials said the tariffs have triggered a surge of orders that mills say exceeds their current capacity, a situation that threatens to produce construction delays, budget problems and possibly cancellations for future construction projects.
“Considering the impact the mere threat of tariffs have had on materials prices and demand, prices are likely to increase further as the new trade restrictions come online,” said Stephen Sandherr, the association’s chief executive officer.
“Forcing contractors to pay more for materials and wait longer to receive them will make construction more costly and slower.”
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