Cautious optimism—it’s a phrase we’ve been using to describe our outlook on the construction industry for some time now. Generally speaking, the construction industry is picking up. Reports from our own offices in Oklahoma, Kansas, Missouri, and Arkansas are all the same: overall materials prices are holding steady with fluctuations for a few specific commodities (see table), leaving labor as the number one concern. Every market is reporting a need for skilled workers in all trades. Subcontractors are struggling to find enough qualified workers to keep up with demand. This shortage of labor, combined with an increase in projects, will undoubtedly spark increased labor costs and overall project costs nationwide. AGC Chief Economist Ken Simonson estimates that labor cost are likely to increase collectively anywhere from 2-5% for 2014.
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As noted above, materials prices appear to be steady, with some peaks for specific products that could affect overall project costs. The overall Producer Price Index (PPI) for inputs to the construction industry—that is, a collection of all materials and supplies supporting the construction industry—is up 2.0% from July 2013 to July 2014. The table below, based on the latest numbers from the U.S. Bureau of Labor Statistics, highlights the major trends and materials price changes nationally.