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The producer price index for construction materials rose nearly 7 percent from March 2010 to March 2011, revealing an average cost increase across the board for materials used by contractors. Meanwhile, the prices that contractors can expect to charge on projects have increased only 1 percent, as the country鈥檚 consumer price index, a standard measure of inflation, has slowed.

Price increases have been less dramatic this year than in 2008, and some contractors and economists say they expect improvement as the months go on. In the meantime, the cost crunch has put pressure on contractors, who expect this summer to be challenging.

鈥淚鈥檝e seen the gas prices affect everything, mainly on concrete and things like Sheetrock,鈥� said Gabriel Maldonado, project manager with Kaya Construction. 鈥淚t鈥檚 been a bit of a struggle, to say the least.鈥�

鈥淥ver the short to medium term there鈥檚 really very little that contractors can do,鈥� said Ken Simonson, chief economist for the Associated General Contractors of America. Substituting less expensive or fuel-intensive materials isn鈥檛 an option, he added. 鈥淭hey鈥檙e generally asked to bid on a set of plans and they have to take what the designers put in those plans.鈥�

Mike Cowan of Cowan Construction said that as a high-end home remodeler, he has been able to pass on many cost increases to owners. But his subcontractors have been feeling the pinch.

鈥淭he increase in (costs of) materials is being offset by labor costs,鈥� Cowan said. Concrete, framing and roofing contractors are cutting wages to get more full weeks of work, he said. 鈥淯nfortunately, there鈥檚 not a lot of meat on that bone 鈥� there鈥檚 not a lot you can come down before it鈥檚 not worth it.鈥�

Crude oil prices affect many construction materials: transport of heavy materials like concrete is affected by high fuel costs; asphalt and other products contain petroleum; and mining of coal and iron requires gas-guzzling machines.

鈥淎ll of our trades 鈥� every one 鈥� (are) being impacted by materials costs,鈥� said Erik Teyema, manager of mechanical construction at McKinstry. The firm is able to pass on that cost to an owner if it can predict it in the bid. But once the contract is in place, 鈥測ou have to absorb it,鈥� Teyema said.

McKinstry and other contractors have clauses in bids saying they will be held to the prices for only 30 days. But in a volatile market the company is more likely to hold owners to that part of the agreement, Teyema said.

鈥淵ou have to stick to your guns,鈥� he said.

Copper prices have climbed past their 2008 highs in the past year, but Simonson said even they have probably peaked. While oil prices shot up to a record in 2008, this year they have increased in a 鈥渟tair-step鈥� pattern this year, driven by events in North Africa and the Middle East, he said.

Crude oil prices will continue to increase in the relatively short term, but should end as soon as early fall, according to an analysis by Reed Construction Data Chief Economist Jim Haughey published this week.

Simonson came to a similar conclusion. 鈥淚 don鈥檛 have a crystal ball,鈥� he said, 鈥渂ut unless trouble breaks out in some new area, I don鈥檛 expect to see diesel prices to go up much higher, and they might actually go down in the next few months.鈥�

鈥淭here鈥檚 a sense that there鈥檚 a little bit more stability,鈥� Maldonado said. 鈥淚n 2008 there was a sense of panic 鈥� contractors and business owners were wondering if they were going to make it. Now, those of us who did are wondering when things are going to pick back up.鈥�