As economists warn of tough times ahead amid rising oil costs and the weakening U.S. dollar, the fallout from ongoing inflation is being felt across the industry as highway, commercial and power projects are being delayed, scaled-back or abandoned. World materials demand coupled with record fuel costs are ratcheting up cost indexes.
“It’s really brutal,” says Ken Simonson, economist at Arlington, Va.-based Associated General Contractors. In a Construction Inflation Alert issued by AGC this month, Simonson predicts a 6% to 8% increase in construction costs this year, following two years of double-digit cost increases. Steel, copper and paving asphalt will rise this year, and “it will be a particularly difficult year for diesel, which is up about 55% over last year,” he says. High oil prices will particularly hurt state transportation departments, as highway construction costs have jumped 49% over the past year.