April 15, 2008 
Summary
The aggregate price of inputs to construction industries increased 6.5 percent over the past 12 months, according to the April 15 release of the Bureau of Labor Statistics March 2008 producer price index (PPI) data. The rise was more rapid compared to the previous 12-month period (March 2006-March 2007) when construction input prices went up 3.9 percent. Construction inputs include materials such as cement, lumber, steel and diesel fuel.
Construction inflation remains less pronounced than during the 2004-2005 period, when overall 12-month construction price increases routinely approached 10 percent. That said, in terms of a one month percent change, the overall price of construction inputs rose 2.1 percent in March over February 2008, which represents the largest one-month increase this decade. Overall PPI rose 1.1 percent in March and 6.9 percent over the past 12 months.
What This Means
Associated Builders and Contractors (ABC) concludes that for commercial and industrial contractors, this is not good news. Previous producer price increases were sharper than those recorded in March, but also took place during a time of economic expansion. With the economy now likely in recession and credit markets still in turmoil, customers will be particularly sensitive to price, which will make it difficult for ABC members and others to pass along materials price increases to their clients.