Trade & Residential Construction
Construction spending figures are watched closely each month as a key indicator of the health of the construction market. While certain spending categories, such as public construction, show strong positive growth, others, like private residential construction are stalled. Industry analysts point, among other things, to the negative drag caused by the rising cost of materials and a labor shortage in the industry.
Major construction associations, such as the Associated General Contractors (AGC) and the National Association of Home Builders (NAHB), continue to warn that tariffs have a negative impact on the sector due to their impact on material costs. Over the last year, the industry has dealt with tariffs placed on Canadian lumber, an ongoing trade war with China, impacting numerous building materials categories, and the threat of tariffs on goods entering the US from Mexico.
The actual impact of the disruptions in trade is not always clear. The U.S. Bureau of Labor Statistics’ Producer Price Index (PPI) for inputs to construction industries shows prices for building materials continue to be elevated in numerous categories. The PPI index for inputs to residential construction rose steadily last year. While it dipped in December and January, it began to edge upward again in the Spring.
The AGC and NAHB warn that tariffs and countermeasures by US trading partners are adding costs and uncertainty to construction projects and could potentially reduce demand for numerous project types. Due to all the uncertainty in the market, contractors are having a difficult time estimating project costs accurately. In local news coverage around the country, local home builders acknowledge that tariffs have increased the cost of building a house. Many contractors absorb the first 1-2% of the increase but pass the rest on to the consumer. The uncertainty surrounding trade will continue to impact the sector.
As this unknown validity continues, Residential Construction is here to help in any way we can from extensions on projects due to delays labor or materials to limit adjustments. Contact your agency’s underwriter when you have questions.