Prices Continued to Rise for Contractors in December, Reports AGC

Washington, DC, January 18, 2021-A cost squeeze for contractors intensified in December as the producer price index (PPI) for nonresidential building construction-a measure of the price that contractors say they would charge to build a fixed set of buildings-inched up 0.1% from November, while the PPI for inputs to new nonresidential construction jumped 1.7%, according to the Associated General Contractors (AGC).

“Since hitting a low in April, the ‘bid price’ PPI has edged up only 0.1%, while the PPI for new-construction inputs has increased 8.1%. Prices for numerous inputs have been volatile in recent months. The PPI for diesel fuel soared 12% in December but was nevertheless down 2.8% year-over-year (y/y) since December 2019. The PPI for copper and brass mill shapes climbed 6.8% for the month and 20% y/y; lumber and plywood, 6.7% and 36%, respectively. There were also major variations within broad categories. The PPI for steel mill products rose 3.7% for the month and 2.0% y/y. But the PPI for prefabricated metal buildings climbed 2.6% and 12%, respectively, while the PPI for sheet metal products was unchanged for the month and declined 0.3% y/y.

“Some of the cost increases may reflect tight supplies of construction materials due to plant closures, shortages of key workers, or transportation bottlenecks. In a favorable indicator for improving availability, the Fed reported today that its index of industrial production for construction supplies increased 1.9% from November to December, although the index declined 1.6% y/y.”

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