Construction Costs Cool

Construction material costs took a pleasing plunge in November, while other producer prices rose, according to a recent announcement by Ken Simonson, chief economist for the Associated General Contractors of America. “But the next 12 months are still likely to show higher costs for construction than for the economy as a whole,” he cautioned.

Simonson was commenting on the Dec. 19 producer price index (PPI) report from the Bureau of Labor Statistics. “The index for construction materials and components dropped half a percent in November, even as the overall PPI for finished goods climbed 0.8%,” he remarked. “But over the last 12 months, construction costs have jumped 5% vs. 2% for the consumer price index and a skimpy 0.9% for the finished-goods PPI.

“The recent retreat in construction costs was widespread but not universal,” Simonson continued. Petroleum, cement and metals remain at historically high levels, which will tilt nonresidential construction costs up. “As long as demand in industrializing countries remains strong, construction is likely to face higher costs,” said Simonson.