SURGING FUEL, ASPHALT, STEEL COSTS 'CLOBBER'
CONSTRUCTION BUDGETS, AGC SAYS
"Surging prices for diesel fuel, asphalt, steel
and other materials are clobbering construction
budgets," Ken Simonson, Chief Economist for The
Associated General Contractors of America (AGC),
said recently. Simonson was commenting on the
producer price index (PPI) for June reported
today by the Bureau of Labor Statistics (BLS).
The PPI for inputs to construction industries -
materials used in all types of construction plus
items consumed by contractors, such as diesel
fuel - surged 10.4 percent over the past 12
months. The index for highway and street
construction leaped 18.9 percent.
"Bad as those figures sound, the increases in
asphalt and steel costs have been even worse
since these prices were collected in mid-June,"
Simonson asserted. "In the first two weeks of
July, asphalt prices have jumped by 40 percent
in several parts of the country. Prices for
rebar-steel used to reinforce concrete in
highways, bridges and buildings?soared $200 per
ton."
Regarding diesel fuel, the Energy Information
Administration reported last night that the
average price of highway diesel hit a new record
of $4.76 per gallon, up 12 cents just in the
past two weeks. "These figures won't show up in
the PPI until next month, but contractors are
paying them now," Simonson noted.
"Suppliers have been announcing price increases
for many other products as well," Simonson
added. "Yesterday, two gypsum makers told
contractors that wallboard prices would rise at
double-digit rates in each of the next three
months."
In the futures markets, aluminum has been
setting records, while natural gas has doubled
in price from a year ago. That has triggered
jumps in the cost of construction plastics -
such as polyvinyl chloride pipe, insulation and
flooring - that use natural gas as a feedstock.
"Unless Congress passes additional funding in
the next few weeks to keep highway construction
funds flowing, many states will stop awarding
contracts," Simonson warned. "Other public
agencies, as well as private owners, must adjust
their budgets promptly to reflect the new price
realities for construction."
