Prices for construction materials were flat in March, as plunging diesel fuel and metals prices offset increases in items used in new housing and nonresidential building renovations, according to an analysis of new federal figures by the Associated General Contractors of America (AGC). Association officials noted that contractors have kept the prices they charge to build structures level, leaving their margins vulnerable to price spikes for key inputs.
“Thanks to a recent, sharp drop in diesel fuel prices last month—along with continuing declines in steel, copper and aluminum prices—overall construction costs were unchanged from February and up only 0.9% over the past year,” said Ken Simonson, chief economist for AGC. “However, building contractors had to absorb another month of increases in the cost of lumber and plywood, gypsum products, construction plastics, paint and roofing materials.”
The largest monthly price decrease among construction inputs occurred in the producer price index for diesel fuel, which tumbled 6.0% in March and 6.7% over 12 months. There were also monthly and year-over-year decreases in the indexes for copper and brass mill shapes, which fell 2.6% and 5.5%, respectively; steel mill products, down 0.4% and 9.5%; and aluminum mill shapes, down 0.1% and 2.7%.
In contrast, the producer price index for lumber and plywood jumped 3.7% since February and 17.7% since March 2012. The index for gypsum products such as wallboard and plaster climbed 0.7% and 17.9%, respectively. The cost of plastic construction products rose 0.5% and 1.5%, while the index for architectural coatings such as paint increased 0.4% and 0.6%, and the index for prepared asphalt and tar roofing and siding products rose 0.3% and 8.6%.
“Contractors have held the line on pricing, even as costs shoot up for some items they buy,” Simonson observed. “The net effect of these diverse changes is that some contractors may be squeezed out of business if they are caught by an unanticipated price spike.”