September 10, 2021

Construction Officials Call for Immediate Removal of Tariffs on Key Construction Materials, Urge Congress and the Administration to Take Steps to Repair “Every Level” of the Supply Chain

The prices contractors pay for construction materials continued to increase in August while many firms report struggles to get those materials delivered on time, according to an analysis by the Associated General Contractors of America of government data released today. Association officials urged Washington officials to take steps to help address the challenges impacting the entire supply chain and driving the price escalations.

“July was the seventh-straight month of double-digit price increases for construction inputs,” said Ken Simonson, the association’s chief economist. “Adding to the challenge, contractors are struggling to pass along even a fraction of these added costs onto their clients.”

The producer price index for new nonresidential construction—a measure of what contractors say they would charge to erect five types of nonresidential buildings—rose 5.6 percent over the past 12 months. That was little more than a quarter of the 20.6 percent increase in the prices that producers and service providers such as distributors and transportation firms charged for construction inputs, Simonson noted.

There were double-digit percentage increases in the selling prices of materials used in every type of construction. The producer price index for steel mill products increased by 123 percent compared to last August. The index for lumber and plywood jumped 15.9 percent during the past 12 months. The index for copper and brass mill shapes rose 45.3 percent and the index for aluminum mill shapes increased 35.1 percent. The index for plastic construction products rose 29.6 percent. The index for gypsum products such as wallboard climbed 22.9 percent. The index for insulation materials rose 17.2 percent, while the index for prepared asphalt and tar roofing and siding products rose 15.8 percent.

In addition to increases in materials costs, transportation and fuel costs also spiked. The index for truck transportation of freight jumped 14.1 percent. Fuel costs, which contractors pay directly to operate their own trucks and off-road equipment, as well as through surcharges on freight deliveries, have also jumped.

Association officials added that a survey of construction firms the association released last week found that most contractors were experiencing delays in shipments of many types of construction materials. The association officials urged the Biden administration and Congress to take steps to improve the supply chain and address price inflation, including removing tariffs on key construction materials.

“Contractors are having to pay more for materials even as it becomes harder to predict when those supplies will show up,” said Stephen E. Sandherr, the association’s chief executive officer. “Removing needless measures that are artificially inflating the cost of key materials, such as tariffs, will help employers who are struggling to cover the costs of inflation and uncertainty.”

View producer price index data. View chart of gap between input costs and bid prices. View the association’s Construction Inflation Alert.