Recent Publications
The Associated General Contractors of America released their material cost publication last week, and The Idaho Statesman also published an article on rising costs.
The AGC of America report also included a forecast based on a comprehensive set of variables. Its current estimates are a 4%-9% increase in material costs for 2012 along with a more steady 1.5%-2.5% increase in labor costs.
Cost Change Compared to Inflation
Construction costs naturally rise over time as inflation takes effect, so many people have suggested that the government’s infusing/printing of money in recent years is largely responsible for the increase in material costs. Although it certainly has a significant effect, particularly when importing materials from certain countries, the graph below shows us that the Producer Price Index(PPI) for construction is rising at a higher rate than the Consumer Price Index(CPI).
Construction Unemployment Improving
As unemployment and wages have been a limiting factor in rental rate increases, it’s always encouraging to see signs that these restrictions are diminishing. The map below illustrates construction employment year-over-year changes for January and places us with a relatively moderate growth rate.
The full AGC report available here is quite informative and addresses data regarding new shale gas resources, population change, construction unemployment, material costs, and some supply/demand topics both foreign and domestic.
