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New Data Shows the Construction Industry Continues to Struggle to Offset Rising Prices for Materials and Subcontractor Services, As Price Decline in Latest Month Fails to Offset Annual Cost Increases

The price of materials and services used in nonresidential construction continued rising at a double-digit rate in November from a year earlier, propelled by outsized increases in the cost of a variety of building materials, according to an analysis by the Associated General Contractors of America of government data released today. Association officials noted that contractors are having to pay more both for materials and for the subcontractor services they need to finish most projects.

“Although inflationary pressures are cooling in some areas, overall costs for construction are still rising at painfully high rates,” said Ken Simonson, the association’s chief economist. “In addition, subcontractors are reacting to higher materials and labor costs by raising their prices.”

The producer price index for inputs to nonresidential construction—the prices charged by goods producers and service providers such as distributors and transportation firms—rose 10.1 percent since November 2021 despite decreasing 0.4 percent from October to November. The year-over-year rise outpaced the 7.4 percent increase in the overall producer price index for finished goods, the economist noted.

Prices of numerous widely used goods posted double-digit increases over the past 12 months. The producer price index for diesel fuel leaped by 59.6 percent despite a one-month decline of 3.4 percent in November. The index for paint and other architectural coatings rose 26.3 percent over 12 months. There were also increases of more than 10 percent annually in the price indexes for gypsum products such as wallboard (18.0 percent); insulation products (14.3 percent); asphalt and tar roofing materials (12.5 percent); flat glass (12.3 percent); plastic construction products (11.3 percent); and truck transportation of freight (11.1 percent).

Products used in highway and heavy construction also experienced double-digit price increases from November 2021 to last month. The index for liquid asphalt, used in paving projects, jumped 19.8 percent, while the index for concrete products climbed 14.3 percent.

Subcontractors’ prices for new, repair, and maintenance work also increased sharply in the latest 12 months. The price index for roofing contractors jumped 20.8 percent. Prices rose by 15.0 percent for work by plumbing contractors, 13.8 percent for electrical contractors and 10.9 percent for concrete contractors rose.

Association officials said construction prices were likely to continue to increase while contractors are paying more for materials and subcontractor services. They urged public officials and private sector developers to factor in higher construction costs when planning for new construction projects to avoid having few or no bids for projects.

“Christmas trees aren’t the only thing getting more expensive this year,” said Stephen E. Sandherr, the association’s chief executive officer. “Construction prices will continue to increase until prices come down a bit more for key materials and services.”

View producer price index data.