Construction Prices Sky Rocket Inflation - GineersNow Construction digital magazine

C O V E R
S T O R Y
When construction costs rose sharply in March 2021, the AGC began
posting multiple issues of the Construction Inflation Alert to educate
project owners and government authorities as well as the general public
about the consequences. That Alert has been updated five times already,
indicating that things are far from normal.
In contrast to the rest of the economy, the construction sector has had
a much more uneven recovery in 2021 and seems to be on track for
continued expansion. Various contractors were unable to completely
pass on their increased costs due to a lack of demand for many forms
of non-residential building projects until recently. As a result of several
Covid-19 outbreaks, there has been a significant reduction in production,
distribution, and workforce availability.
It is a mix of supply chain bottlenecks, unexpected prices and delivery
delays, and smaller bid price increases that threatens to put some
enterprises out of business.
In 2021, the cost of materials soared to a new high for contractors. While
certain expenses have decreased recently, others have continued to
climb or have become unpredictable in both directions, which is a
hazard in its own right.
An all-time high increase in the PPI was recorded in 2021. It increased
by 24.1% between June 2020 and June 2021 before dipping marginally.
There was still a 19.6 percent increase in the rate of growth between
December 2020 and December 2021, compared to the 4.4 percent rise
in 2020 and the 1.8% gain in 2019.
Every kind of building project has seen its costs soar. There are PPIs
for inputs to roads and streets, commercial, healthcare, and industrial
buildings, electricity, and communications, education and vocational,
as well as single- and multifamily development. New multifamily
construction had a 14.6 percent rise in these input cost indices between
December 2020 and December 2021, while commercial buildings saw
a 20.7 percent increase.
What is the reason behind these astronomical price rises? In a nutshell,
the data shows practically everything. Steel mill goods saw a 127.2
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