Construction Costs Declined in December But Remained High YOY

Arlington, VA, January 16, 2019-After a year marked by numerous price spikes, construction costs declined in December but remained elevated compared to year-earlier prices, while prices of new buildings also moved higher, according to an analysis by the Associated General Contractors of America of new Labor Department data.

Association officials noted that the cost of many construction projects is increasing as firms cope with labor shortages and increased costs for many of the materials they need for projects.

The producer price index for inputs to construction industries-a weighted average of all goods and services used in construction-decreased 0.8% in December but ended the year 3.8% higher than in December 2017. The index for energy costs declined 11.5% for the month and 3.9% for the year. But the price of other goods used in construction climbed 0.1% for the month and 4.8% for the year, more than the 3.3% increase in the index in 2017. The price index for services purchased by contractors also accelerated, rising 0.4% for the month and 4.2% for the year, following a 3.7% gain in 2017.

Association officials said higher construction prices will increase the cost of many public infrastructure projects and could undermine the financial viability of new private-sector development projects.

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