Construction material prices to climb faster than overall inflation, economist says

Material prices rose by .3 percent in February and are likely to continue rising faster than the overall rate of inflation in 2006, said Ken Simonson, chief economist for the Associated General Contractors of America.

“Construction material costs are outpacing overall consumer and producer prices by a wide margin,” Simonson said. “The rate of increase for construction materials and component prices could be closer to the 10.1 percent rate of 2004 than the 6.1 percent rate of 2005.”

As of mid-March, the national average retail price of diesel fuel was around $2.55 per gallon, 35 cents higher than a year ago, Simonson said. Asphalt prices will also increase 10 to 20 percent this year, Simonson said, while other products that rely on natural gas or have high transport costs, such as paints and coatings, insulation and brick, are likely to rise 5 to 10 percent this year.

While a majority of the price increases may be due to last year’s hurricane season, rebuilding in Mississippi and Louisiana will not cause a similar affect.

“Rebuilding from hurricanes Katrina, Rita and Wilma is not likely to have much impact on national markets for materials or labor, but will apparently be very protracted,” Simonson said. “The overall level of construction in Louisiana will probably remain below pre-hurricane levels for several months at least.”