Construction materials prices on the climb

Prices for construction materials are rising across the country, and area businesses are grappling with the increased costs.

According to the Kansas City-based Associated Builders and Contractors Inc., construction materials prices rose for the second month in a row, up 0.9 percent in September, based on the U.S. Department of Labor’s producer price index report. In comparison to the same time last year, prices are 1.6 percent higher.

“There is precedent for this type of counterintuitive response,” said ABC Chief Economist Anirban Basu, in a news release. “Many construction industry participants will remember early 2008, a period during which the global economy was decelerating and materials prices were surging. There are likely some parallels between that period and our current economic situation.”

Construction spending decreased for the second straight month, falling 0.6 percent in August, according to the latest report from ABC released Oct. 1. The report also found that nonresidential construction spending fell 1.3 percent to a seasonally adjusted annual rate of $557.2 billion.

“The reluctance to invest in construction has been growing as the nation moves closer to falling off its fiscal cliff. Since near-term resolution is unlikely, the expectation is that the next few months also will be soft,” Basu said.

Roy Cleous, co-owner of Copper Manor Architectural Products LLC in Springfield, said he has seen the costs of materials fluctuate and believed the reason was due to suppliers not stocking enough inventory. The business primarily deals with architectural sheet metal, which includes copper finials and cupolas, he said.

“Whenever it’s needed, it’s not stocked,” Cleous said. “If they have it, then they mark a price. If they don’t, then they’re kind of guessing what it will be.”

That has resulted in costs being directly passed to customers, Cleous said, citing personal experience. The company has been involved in several commercial construction projects in the area, including the recent renovation of Garst dining hall at Missouri State University.

Todd Ball, an independent contractor for Spokane Forest Products, said he also has noticed a surge, noting that prices on reclaimed wood have risen 15 percent compared to last year. In addition, he said gas prices also have affected costs due to delivery and operational expenses.

Still, Ball added there is a high demand from the Spokane, Wash.-based business for reclaimed wood products, which are reused in new construction.

“People are trying to be more environmentally conscious,” he said.

Level economy
However, Chip Wood, general manager of the Springfield office for Kansas City-based Sierra Building Products, said he believes the issue surrounding an increase in materials prices nationwide is much different on a local level.

“I don’t think you can look at Springfield on a national basis and come out with a true sense of what’s going on comparatively,” Wood said.

The reason, he said, is “based on our (Springfield’s) economic situation with manufacturing, distribution, tourism, general growth and cost of living.

“We’re not a Detroit,” Wood said. “It’s Springfield, Mo., and you just don’t see those swings.”

As a result of slow demand, the U.S. construction industry unemployment rate rose to 11.9 in September. The construction industry jobless rate last month was down from 13.3 percent, compared to September 2011.

“While the nation has added 1.8 million jobs during the past 12 months, the construction industry has lost 5,000 jobs,” Basu said. “Construction starts remain weak, and it is unlikely we will see acceleration in nonresidential construction spending any time.

“On the other hand, with many projects having been put on hold in recent months due to economic uncertainty, there is the possibility that the latter portion of 2012 may show some improvement,” he said. “Owners and developers may decide it is no longer to their advantage to delay projects.”