Materials costs predicted to rise again

The Associated General Contractors of America released its fifth Construction Inflation Alert, warning owners, budget setters and contractors to expect larger materials and labor cost increases in 2008 than they have experienced in the past 12 months. "Nonresidential construction has had a banner year so far in 2007 and we've seen spending on nearly every segment increase compared to 2006, despite the plunge in homebuilding," said AGC Chief Economist Kenneth Simonson. "The materials cost surges that plagued the industry in 2004-2006 have slowed dramatically, and labor remains available in most markets. Simonson warned that many observers expect that the end of the calm is coming soon, "The worsening slide in homebuilding and turmoil in the credit markets threaten some types of nonresidential construction. At the same time, some materials costs are beginning to turn up again, and labor costs have started to accelerate." Meanwhile, the nonresidential industry has benefited from greater availability of specialty trade workers who have lately shifted from residential work. Simonson added, "But wages have begun rising more steeply for specialty trade contractors, suggesting that the number of workers suitable to switch is close to exhaustion. In the next several months, the rate of wage increases is likely to reach 5-5.5 percent, up from a recent 4.5 percent gain." Your comment?