AGC: Construction Contractors 'Paying More to Earn Less'

Construction contractors continue to be squeezed between rising materials costs and falling output prices according to a new analysis of materials costs conducted by the Associated General Contractors of America, one of the largest trade associations for companies in the U.S. construction industry. The association noted that even as the producer price index leapt in April for key construction components, the amount contractors charge for construction services remains depressed.

“Paying more to earn less is not a sustainable business model,” said Ken Simonson, chief economist for the Associated General Contractors of America. “Contractors are not going to be able to sustain the low prices they have been charging for much longer.”

Simonson noted that prices increased significantly for a range of construction components. Compared to March, April data shows that diesel fuel was up 6.5 percent (not seasonally adjusted), steel mill products were up 5.2 percent, lumber and plywood were up 4.7 percent, copper and brass mill shapes were up 4.3 percent, aluminum mill shapes were up 3.6 percent, and gypsum products were up 2.4 percent. Over the past year, increases in materials costs by structure type have ranged from 3.9 percent for single-unit residential construction to 8.3 percent for inputs to highway and street construction.

Meanwhile, the producer price index for finished nonresidential building—reflecting what contractors would bid to construct a new building—was little changed for the month and down significantly from a year earlier, Simonson said. Prices for new office buildings fell 0.1 percent from March and 4.3 percent from April 2009. The index for new industrial buildings was unchanged from a month ago but down 4.0 percent from the year before. The index for new warehouses was up 0.2 percent for the month but down 4.6 percent over 12 months, and the index for new schools was up 0.7 percent in one month but down 1.5 percent over 12 months.

“These trends suggest that anyone considering a construction project should break ground promptly, before materials costs are reflected in higher bids and while there are still abundant contractors to do the work,” Simonson said.

To view producer price index figures, go to http://newsletters.agc.org/datadigest/files/2010/05/ppi-tables-201004.pdf.

Download Center

HTML - No Current Item Deck
  • Free Safety Management Software Demo

    IndustrySafe Safety Management Software helps organizations to improve safety by providing a comprehensive toolset of software modules to help businesses identify trouble spots; reduce claims, lost days, OSHA fines; and more.

  • Get the Ultimate Guide to OSHA Recordkeeping

    When it comes to OSHA recordkeeping there are always questions regarding the requirements and in and outs. IndustrySafe is here to help. We put together this page with critical information to help answer your key questions about OSHA recordkeeping.

  • Safety Training 101

    When it comes to safety training, no matter the industry, there are always questions regarding requirements and certifications. We put together a guide that’s easy to digest so you can ensure you're complying with OSHA's training standards.

  • Conduct EHS Inspections and Audits

    Record and manage your organization’s inspection data with IndustrySafe’s Inspections module. IndustrySafe’s pre-built forms and checklists may be used as is, or can be customized to better suit the needs of your organization.

  • Track Key Safety Performance Indicators

    IndustrySafe’s Dashboard Module allows organizations to easily track safety KPIs and metrics. Gain increased visibility into your business’ operations and safety data.

  • Industry Safe
comments powered by Disqus