Materials Costs & Bid Prices Declined in September

Washington, DC, October 20, 2021- Unusually, materials costs and contractors’ bid prices both declined from August to September, but the gap between the two prices remained wide over the latest 12 months, reports Associated General Contractors.

The producer price index (PPI) for new nonresidential building construction-a measure of the price that contractors say they would charge to build a fixed set of buildings-dipped by 0.1% from August but increased 5.0% year-over-year (y/y) since September 2020, while the PPI for material and service inputs to new nonresidential construction slipped 0.3% for the month but soared 19.7% YOY.

The decline in the input PPI was due mainly to lumber and plywood, which plunged for the third-straight month, by 11%, and by 12% YOY. In addition, the PPI for copper and brass mill shapes declined 1.1% in September, but it jumped 40% YOY.

Other materials continued to rise in price, with double- or even triple-digit percentage increases YOY. The PPI for steel mill products climbed 5.0% for the month and 134% YOY; diesel fuel, 4.9% and 89%, respectively; aluminum mill shapes, 3.8% and 35%; plastic construction products, 1.4% and 30%; gypsum products, 0% and 23%; insulation materials, 1.7% and 19%; truck transportation of freight, 0.8% and 15%; asphalt felt and coatings, 0.1% and 12%; and architectural coatings, 0.4% and 11%. There were smaller but nevertheless unusually large YOY increases for flat glass, up 0.3% for the month and 7.2% YOY; asphalt paving mixtures and blocks, 0% and 5.7%, respectively; concrete products, 0% and 5.6%; and construction machinery and equipment, 0% and 5.4%.

Bid prices, as measured by PPIs for new buildings and subcontractors, have risen at diverse rates. PPIs rose 7.1% YOY for new warehouse building construction, 5.9% for offices, 5.1% for health care buildings, 4.9% for industrial buildings, and 3.2% for schools. PPI increases for new, repair, and maintenance work ranged from 6.5% for concrete contractors to 6.4% for roofing, 6.1% for plumbing, and 4.3% for electrical contractors. AGC posted tables and graphs of construction PPIs.

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