Prices are high

"Construction materials costs are outpacing overall consumer and producer prices by a wide margin," says Ken Simonson, chief economist for The Associated General Contractors of America (AGC). "Today the government reported that the producer price index (PPI) plunged 1.4 percent in February but the PPI for construction materials and components rose 0.3 percent." Simonson today issued an updated analysis of construction materials costs in the latest version of AGC's Construction Inflation Alert, which shows that with a generally strong outlook for construction activity, materials prices are likely to rise faster than the overall rate of consumer or producer prices again in 2006. In the report Simonson says, "the rate of increase for construction materials and components prices could be closer to the 10.1 percent rate of 2004 than the 6.1 percent rate of 2005. Once again, however, prices are likely to vary greatly by type of material and project." Simonson says the national average retail price of diesel fuel was around $2.55 per gallon, 60 cents below the record set after Rita but 35 cents (16 percent) higher than a year ago. "It appears diesel prices for 2006 as a whole will be up 10-30 percent over 2005, with wide month-to-month variation," says Simonson. He also says that asphalt prices will be elevated and may go higher by year-end, as refiners introduce more desulfurization equipment that leaves less liquid asphalt at the end of the refining process; construction plastics prices should come down from recent highs but average 10-20 percent higher than year-ago levels; and other products that rely on natural gas or that have high transport costs, such as paints and coatings, insulation, and brick, are likely to rise 5-10 percent in price." Your comment?