Sticker Shock

Construction materials prices will be keep rising, according to The Associated General Contractors of America (AGC) The association just released its latest Construction Inflation Alert (CIA), and warned of an inflation rate for construction materials of six to eight percent, with periods of 10 percent increases possible. Construction segments like highways, that are most dependent on volatile prices for petroleum products, are particularly vulnerable to such price increases. "Private owners, public agencies that do budgeting and design, and contractors should all be aware that construction materials prices are likely to keep rising at a much faster rate than the three-to-four percent increase in the consumer price index (CPI) or broad producer price index (PPI) for finished goods," said AGC's Chief Economist Ken Simonson. "If these increases continue, I'm concerned that the inflation rate for construction materials could be double the rate of overall inflation." Simonson continued, "The extreme cost increases or volatility of some construction inputs are proving troublesome to contractors because they have been sudden, extreme and unexpected." Two factors make construction vulnerable to above-average cost increases. Contractors are generally locked into fixed quantities of materials, and construction costs are vulnerable to transportation costs and bottlenecks. Unlike consumer electronics makers, for example, contractors cannot generally make a building or a highway smaller or lighter. Contractors also require physical delivery of large quantities of goods to a specific location, in many cases from around the world and any number of influences can drive up delivered costs.. Your comment?