Construction Materials Prices Climb in January, More Increases Expected

January's large price increases for gypsum, insulation, lumber and plywood offset declines in asphalt, steel mill products, and iron ore costs to boost the construction materials' price index by 0.7 percent for the month, and 1.3 percent year-over-year.

Prices for construction materials moved higher in January, propelled by large jumps in items used in new housing and nonresidential building renovations. The producer price index (PPI) for all construction inputs – what contractors pay for construction materials – rose 0.7 percent between December and January, and is now up 1.3 percent compared to 12 months ago.

"Contractors had to contend with huge leaps in prices for gypsum, wallboard and lumber, as well as significant increases in the cost of insulation and architectural coatings such as paint," said Ken Simonson, chief economist for the Associated General Contractors of America (AGC), which released the report based on analysis of federal data. "Based on pump prices for diesel fuel and price announcements by various manufacturers, it is clear that costs are rising significantly higher in February."

Association officials cautioned that contractors are paying more for a range of key construction materials, adding injury to the insult of a federal spending sequestration that threatens to cancel an estimated $4 billion worth of publicly funded construction projects in 2013. A revised AGC analysis of the impacts of sequestration identified a host of federal construction programs that will experience significant cuts this year.

"After years of struggling to survive extremely difficult market conditions, it would be a shame to see firms close shop because Washington officials can't solve a funding crisis of their own making," said AGC CEO Stephen Sandherr.

Click here to view the January 2013 PPI table.