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Industry experts: Higher construction costs might not last

Tue, Aug 23, 2011

News

Construction costs increased in July as contractors paid more for materials and were able to charge more for their services, according to an analysis of producer price index figures released today by the Associated General Contractors of America.

While the change was good news for the construction industry, analysts wonder how long the trend will last, according to the AGC. Industry experts expect public sector investment to shrink in coming months as government bodies cut spending and freeze plans for capital improvements.

Construction programs have already accounted for more than 50 percent of federal budget cuts for fiscal year 2012, association officials said. Declining public sector investments would make it hard for contractors to continue raising prices.

“Contractors will have a hard time increasing, or even holding the line on bid levels if the federal government continues to cut investments in infrastructure and construction,” Stephen E. Sandherr, the association’s CEO said in a statement.

He added that construction prices are still depressed and anyone looking for a deal, would be wise to act now in case materials costs continue to increase.

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