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News April 19, 2018

Construction material prices increase could inhibit profit growth

An Associated Builders and Contractors (ABC) analysis of information provided by the Bureau of Labor Statistics (BLS) shows construction material prices increased 0.8 percent from February to March, according to On a year-over-year basis, the price of construction materials increased 5.8 percent.

The materials with the largest price increases from February to March were crude petroleum (5 percent), iron and steel (2.3 percent), softwood lumber (2.2 percent) and concrete products (2.2 percent). Nonresidential construction material prices increased 0.9 percent from February to March and 5.6 percent between March 2017 and March 2018.

Of all the categories the BLS tracks, the biggest year-over-year increases were natural gas (34 percent), softwood lumber (16.3 percent), unprocessed energy materials (8.6 percent) and iron and steel (6.5 percent).

ABC Chief Economist Anirban Basu says the construction industry can expect higher steel prices soon as end users and suppliers negotiate new pricing agreements that include the tariff imposed by the Trump administration. Rising wages and material prices reportedly are expected to stifle profit margin growth.

This supports the view of some that the 25 percent steel tariffs and 10 percent aluminum tariffs potentially could hinder construction industry profits, especially considering the existing labor shortage and resulting wage increases. Industry groups such as the Associated General Contractors of America have warned the administration that steel and aluminum are so widely used in construction projects that the tariffs could force project delays and even cancellations.


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