ARLINGTON, VA. — Construction costs in the U.S. rose again in June, with steep increases for a wide range of building and road construction materials as tariffs against foreign goods come into effect, according to an analysis by the Associated General Contractors of America of new U.S. Labor Department data.
Association officials say contractors will have to assume much of the costs as tariffs increase the costs of many key construction materials, said a recent media release.
The U.S. producer price index jumped by 20 per cent for aluminum mill shapes, 17.4 per cent for copper and brass mill shapes and 12.3 per cent for steel mill products between June 2017 and June 2018.
Other construction inputs that rose sharply in price from May 2017 to May 2018 include diesel fuel, 52.8 per cent; lumber and plywood, 18.3 per cent; asphalt felts and coatings, 7.5 per cent; ready-mixed concrete, 5.5 per cent; and paving mixtures and blocks, 5 per cent.
“Contractors’ costs for a wide range of materials and services have escalated dramatically in the past few months, putting a squeeze on profits and dimming the outlook for both public and private projects,” said the association’s chief economist, Ken Simonson, in the statement, noting the U.S. imposed steel and aluminum tariffs on imports from Canada, Mexico and the European Union on May 31 and has since announced over $200 billion in tariffs on Chinese goods.
“Tariffs that took effect or have been announced since this price data was collected will push costs up even more.”
The producer price index for inputs to construction industries, goods, a measure of all materials used in construction projects including items consumed by contractors, such as diesel fuel, rose 9.6 per cent over 12 months. The year-over-year increase was the steepest since October 2008.
“Many of these increases far outstripped the 4.3 per cent rise in the price index for new construction — what contractors are charging to build projects, implying that contractors’ profit margins are shrinking as they absorb some of the increased costs,” Simonson said.
Association officials say the new tariffs are putting new cost pressures on many construction firms. As many firms struggle to cope with rising materials prices they will have less capital available to invest in personnel, especially as labour costs continue to climb, the release said.
And firms will have less money available to invest in technologies that can make the construction process more efficient.
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