US construction inflation highest since 2005

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The producer price index (PPI) for construction industry inputs hit an annual rate of +6.9% in March 2011, according to the Associated General Contractors of America (AGC). This is the highest this measure of inflation in the industry has been since 2005, when it hit +8.2% according the International Construction magazine website.

The PPI for inputs to construction is a weighted average of the prices of all materials used in construction, plus items consumed by contractors, such as diesel fuel. Indeed, diesel fuel has seen the sharpest price rise of all, with its cost rising +42.5% since March 2010. The other area that has seen sharp increases has been metallic construction products, such as steel bars, pipes and structural members, and copper and aluminium products. Prices or these have risen between +11.7% and +18.9% over the last year.

However, the prices of other products have fallen over the same period, driven by a -3.7% decline in the cost of cement. This has driven down the cost of concrete products by -0.6% overall, with pre-stressed concrete products seeing the biggest decline at -3.4%. The cost of bricks and tiles is also down -3.3% compared to a year ago.

However, with consumer prices rising just +2.7% over the last 12 months in the US and the broad PPI for finished goods rising +5.8%, the AGC sees the +6.9% rise in input costs for construction as bad news for contractors. “This hike added to the cost squeeze on contractors, who have been unable to pass through materials costs in their bids on new buildings,” it said in a statement.

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