While construction materials costs have begun to edge down, a New Jersey industry expert said it's unlikely to generate more construction projects or hiring until after the November election.
"I know a lot of people would love to do more construction. I think the price-point break will get people back in the stores to buy the materials," said Marjorie Perry, president of Newark-based MZM Construction & Management Co. "But I don't think everyone will know where they're going and what they'll do until after the election."
According to an analysis by the Associated General Contractors of America, producer prices for construction materials prices dropped by 0.3 percent in May after ticking up in April and March. The association attributed the slowdown in pricing to declining costs of diesel fuel, down 3.5 percent in May and 0.2 percent from last year; copper and brass mill shapes, down 1.6 percent in May and 8.3 percent from last year; and aluminum mill products, down 1.9 percent in May and 9 percent from last year.
According to Ken Simonson, the association's chief economist, the amount contractors charged to construct projects remained flat for the month, but price indexes for completed nonresidential buildings — which depict estimates of what contractors would charge to build new structures — have begun to outpace year-to-date increases in materials costs. Simonson said materials costs are likely to remain moderate, based on future market pricing data for fuel, copper and steel.
"If it keeps going down, it will provide some relief on the labor part, because there's some bartering opportunities on the materials side, but not on the labor," Perry said.
Perry said construction firms employing nonunion workers will see increased profits from declining materials costs, but for firms with union workers, like MZM Construction, "the benefits will flatten out."
"The union rates keep going up … so if (materials costs) go down a full percent, it will be great across the board, because it will offset the extra costs of having union workers," Perry said. "If we can convince the unions to make more concessions, and with the materials prices starting to come down, it will be a good day for everybody."
Though Perry is not optimistic about the data spurring more construction projects, Stephen E. Sandherr, the association's CEO, said it's an ideal time for government agencies and private-sector owners to start building, since "taxpayers will get a good deal if Congress can complete work soon on long-stalled highway and transit funding, and avoid making further cuts to building and infrastructure construction projects while prices are still relatively low."