Construction Material Costs Up 19 Percent in June

-- Associated Construction Publications, 8/7/2008

Ever increasing material costs are squeezing state transportation budgets and causing real reductions in the actual amount of construction work put in place, according to a new American Road & Transportation Builders Association (ARTBA) economic report. A major spike in diesel fuel, steel and asphalt were the driving forces behind a 19 percent jump in highway and street construction materials in June compared to the same month in 2007.

The ARTBA "Highway Construction Producer Prices" report documents year-over-year increases in the following categories:

• Iron and steel scrap: 97 percent
• Diesel fuel: 85 percent
• Asphalt paving and block manufacturing: 14 percent
• Sand, gravel and crushed stone: 7 percent
• Ready-mix concrete: 3 percent
• Concrete block and brick: 3 percent
• Cement: 1 percent

"We are beginning to see the impacts of rising material prices on the value of construction put in place, which measures current market activity. The nominal value of construction work on highways, bridges and related projects was up 3.1 percent through May 2008 to $24.3 billion, compared to the first five months of 2007," said Alison Premo Black, ARTBA economist and vice president of policy.

However, Black cautioned, "When you take into account rising construction costs, including material prices, the actual volume of construction work performed on highways and bridges so far in 2008 is down about 5 to 7 percent." She added that while the market trended down, transportation construction was faring better than the residential construction sector, which was down 27 percent through June 2008 compared to the first half of 2007.