May 29, 2019

Market Volatility in the Construction Industry: What You Need to Know

According the Federal Bureau of Labor Statistic’s producer-price index, construction costs climbed again in May, resulting in total increase of 8.8 percent for the year.Commercial roofing trade groups and economists alike blame this increase largely on international trade disputes.

The Daily Reporter states that “more trouble is likely on the horizon. Since the new tariffs the U.S. is placing on steel and aluminum imports from Canada, Mexico and the European Union weren’t announced until May 31, those trade barriers had no influence on the price index for May.”

Ken Simonson, chief economist at the Associated General Contractors of America, a construction industry trade group, says “tariffs imposed on steel and aluminum since this data was collected in mid-May are likely to drive contractors’ costs still higher.”

Stephen Sandherr, AGC chief executive, said the mere threat of new trade barriers has already caused roofing construction materials to become pricier.

“Considering the impact, the mere threat of tariffs has had on materials prices and demand, prices are likely to increase further as the new trade restrictions come online,” Sandherr said. “Forcing contractors to pay more for materials and wait longer to receive them will make construction more costly and slower.”

Further compounding the issue of rising commercial roofing prices are the troubles being faced by an under-staffed and under-resourced trucking industry.At the beginning of the year, just one truck was available for every 12 loads, which is the lowest ratio since 2005.The American Trucking Association also reports that in order to meet the rising demand from retailers alone, they would need to hire an additional 50,000 new drivers.

Until that gap is filled, economists say the prices of commercial roofing goods and shipping fees will rise in order to alleviate the strain on companies who have more overtime and fuel costs.For some companies, this also means delaying shipments and denying orders with short lead times.

The increased costs are being passed along from commercial and industrial roofing suppliers in the form of transportation surcharges.This means an added cost for each truckload of construction or roofing materials.

So, what can you do to protect yourself from a volatile market?The most important step is planning ahead.If you know roof replacement and building improvements are in your future, don’t delay in moving forward with them.Current trends indicate that not only will prices continue to rise, but that project delays due to material and labor shortages will become the norm.

After seeking out a qualified roofing professional to perform your roof replacement work, move quickly to lock in prices by putting a contract in place.Taking these proactive steps can not only help prevent your planned maintenance from becoming emergency maintenance, but it can insulate your business from rising costs and delays.

If you have any questions, please feel free to call us at (800) 843-6561 or fill out our contact form.