Inflation drives up the cost of construction projects

A new study shows that key materials are much more expensive than they were a year ago. 2022 has been a difficult year for the construction industry. This week, a national construction group reported prices for building materials, fuel and labor collectively increased by about 10% over the last year. A study by Associated General Contractors of America found the costs of paint and other coatings have increased by 26% over the last year. Dry wall prices are up 18% and insulation is 14% more expensive. Diesel fuel prices were up nearly 60% from a year ago, despite a small decrease in November. “Concrete has been in short supply in many parts of the country and has gone up in price at unusually steep rates," said Ken Simonson, the organization's chief economist. "Steel prices have come down recently, but steel for bridges, in particular, is much more expensive than it had been before the pandemic." Simonson says supply chain bottlenecks continue to be a problem for building firms "and the cost of labor for all kinds of construction firms has been going up at a rapid rate," he said. The increased costs mean many government agencies and private companies with projects on the drawing board are reconsidering whether to move ahead. One of those is a new Interstate 5 replacement bridge that would link Portland and Vancouver, Washington. Its cost is projected to have increased from $5 billion to $6 billion during the last two years. Still, Simonson urges the two states not to wait. “Better to go ahead with a project now when you still have companies interested in doing this. If you wait another year you may find that companies have found lots of other projects to take up their time," he said. Simonson says building companies continue to have a hard time finding enough labor. Construction firms, labor unions and education organizations all over the country are trying different initiatives to attract students and young adults to building careers. But he says they're aren't yet filling the demand.