Construction costs continued to leap in May, climbing 8.8 percent compared with May 2017, the highest year-over-year increase in seven years, according to Labor Department data.
The producer price index for lumber and plywood surged 13.9 percent since May 2017, and aluminum mill shapes, copper, brass and steel mill costs have also shot up by double-digits.
The impact of new U.S. tariffs on steel and aluminum imports from Canada, Mexico and the European Union, imposed May 31, is not reflected in the data, according to the Associated General Contractors of America (AGA), but are likely to continue to drive costs upward.
“The increases far outstripped the 4.2 rise in the price index for new construction, implying that contractors are facing a severe squeeze on costs for both ongoing and new projects,” AGA Chief Economist Ken Simonson said in a statement. “Moreover, tariffs imposed on steel and aluminum since this data was collected in mid-May are likely to drive contractors’ costs still higher.”
Since the tariffs were imposed, construction officials have received an increase of orders that have exceeded the capacity of mills, which could lead to construction delays, budget issues or cancellations of future projects, according to AGA.
“Forcing contractors to pay more for materials and wait longer to receive them will make construction more costly and slower,” AGA CEO Stephen Sandherr said in a statement.
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