Construction costs are outpacing consumer prices, Ken Simonson, chief economist of the Associated General Contractors of America warned last week.

“Inflation at the consumer level remained moderate last month, but many construction inputs are going through the proverbial roof,” Simonson said. “In addition, some materials are in short supply. I’m concerned that price spikes and supply shortages will continue in 2006.

Simonson said that the core rate of both consumer and producer price increases, not including food and energy costs, had risen only about 2 percent during the past 12 months. “In contrast, the cost of inputs for highway and street construction leaped 16 percent; nearly 10 percent for heavy construction; and eight percent for building construction,” Simonson said. “The price index for copper and brass mill shapes was up 21 percent; asphalt 18 percent; gypsum products, such as wallboard 15 percent; plastic construction products 13 percent and concrete products 10 percent.”

Simonson said the greatest concern is fuel prices, with the producer price index for diesel fuel jumping 59 percent from October 2004 to October 2005. “That directly raises the cost of operating off-road equipment like tower cranes and bulldozers,” he noted.

“Contractors also buy diesel fuel to run dump trucks, concrete mixers, and other vehicles. And the truckers who deliver construction materials are passing through higher diesel costs in the form of fuel shortages on most deliveries.”

He added that lumber and plywood prices have fallen and steel prices are mixed, but that the break on wood products benefits mainly single-family construction, not multi-family or nonresidential projects.”

Simonson added that “cement supplies will continue to be a problem for hurricane-wracked southern states and fast-growing areas in the southwest,” unless the Commerce Department alleviates cement shortages by suspending the duty on Mexican cement.