Latest producer price index figures show prices for diesel, steel, bars, steel pipe and other key construction materials have double-digit spikes during the past 12 months.

The prices contractors must pay for many essential construction materials continued to increase in January, even as the amount they charge for completed projects remains flat, according to an analysis of January producer price index figures released today by the Associated General Contractors of America. Association officials noted that the price trends are cutting into already tight bottom lines for contractors, undermining chances for an industry-wide recovery in 2011.

“The last thing contractors need after two years of depression-like conditions is to pay more to make less,” said Ken Simonson, the association’s chief economist. “With margins continuing to shrink, few contractors are likely to benefit even if construction demand picks up this year.”

Prices for materials used in construction jumped 0.9 percent in January and 4.9 percent during the past 12 months, while price indexes for finished buildings barely changed during the same time frame, the economist noted. He added that construction costs also outstripped the producer price index for finished goods, which rose 0.8 percent during the past month and 3.6 percent since January 2010.

Full Story – Cost of Construction Materials Climbs in January