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Construction costs keep rising as tariff anxiety festers

Construction costs climbed again in May, following price increases this spring driven by trade disputes over steel, aluminum and lumber.

The cost of all goods used in construction increased 8.8 percent year-over-year in May. Among individual types of materials, some of the biggest increases in the year-long period were seen for diesel fuel, aluminum mill shapes and lumber and plywood, according to the federal Bureau of Labor Statistic’s producer-price index.

Construction industry trade groups have pinned much of the blame for rising costs on trade disputes. And more trouble is likely on the horizon. Since the new tariffs the U.S. is placing on steel and aluminum imports from Canada, Mexico and the European Union weren’t announced until May 31, those trade barriers had no influence on the price index for May.

Even so, materials rose at a faster rate in May than the 4.2 percent increase seen for the cost of new construction projects, suggesting that contractors will have to find ways to absorb the higher materials costs, said Ken Simonson, chief economist at the Associated General Contractors of America, a construction industry trade group.

“Tariffs imposed on steel and aluminum since this data was collected in mid-May are likely to drive contractors’ costs still higher,” Simonson said.

The producer price index for all construction inputs, such as concrete and steel, rose 2.2 percent in May alone, which is the sharpest increase seen since July 2011. Even before May, materials prices had been rising.. In April, they were up by 6.4 percent from  the same month the year before and a full 1 percent from March.

Construction officials said the new tariffs have triggered a surge of orders for construction materials. Some mills, they said, might not be able to churn out product quickly enough to meet the demand. That crunch could bring about construction delays and budget overruns and possibly lead developers to halt future construction projects.

Stephen Sandherr, AGC chief executive, said the mere threat of new trade barriers has already caused construction materials to become pricier.

“Considering the impact the mere threat of tariffs have had on materials prices and demand, prices are likely to increase further as the new trade restrictions come online,” Sandherr said. “Forcing contractors to pay more for materials and wait longer to receive them will make construction more costly and slower.”

Here’s a rundown of  materials commonly used in construction and how much their costs rose in May:

  • Aluminum mill shapes, 17.3 percent
  • Lumber and plywood, 13.9 percent
  • Copper and brass, 13.8 percent
  • Steel mill products, 10.5 percent
  • Diesel fuel, 44.5 percent
  • Asphalt felts and coatings, 8.9 percent
  • Ready-mixed concrete, 6.5 percent
  • Paving mixtures and blocks, 5.2 percent

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