Contractors brace for tariff-related increases

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Despite unchanging construction costs in July, contractors are bracing for steep increases once new tariffs take hold, according to an analysis by the Associated General Contractors of America of new Labor Department data.

“Despite the pause in cost increases, prices for goods and services used in construction rose over the past year at more than double the rate contractors have raised their bid prices for new buildings,” Ken Simonson, the association’s chief economist, said in a news release.

The report showed a weighted price average of goods and services used in construction was unchanged from June to July but has increased 8.1% since July 2017, while the index that measures what contractors charge rose 3.3% in that period.

“Steel, aluminum and Canadian lumber are all subject to stiff new tariffs, with the prospect that prices will soon rise even more for these and other goods used in construction,” Simonson said. “In addition, the cost of delivering goods and equipment to construction sites, operating diesel-powered equipment and hauling away dirt, debris and equipment is affected by fast-rising prices for fuel and trucking services.”

From July 2017 to July 2018, there were producer price index increases of 43.6% for diesel fuel, 17.8% for aluminum mill shapes, 12.4% for steel mill products and 16.3% for lumber and wood plywood. Among services used in construction, the price index for truck transportation of freight climbed 8.2%.

“Contractors, their employees and their customers — consumers, highway users, businesses and public agencies — all feel the pain of these higher construction costs,” Stephen E. Sandherr, Associated General Contractors of America CEO, said. “Measures to help domestic steel and aluminum producers should not come at the expense of the many users of their products.”