Material and labor cost increases for construction are expected to be larger in 2008 than in the past 12 months, The Associated General Contractors of America said.

AGC, a trade group, made the announcement today in its fifth Construction Inflation Alert, warning owners, budget setters and contractors of the expected higher costs.

“Nonresidential construction has had a banner year so far in 2007 and we’ve seen spending on nearly every segment increase compared to 2006, despite the plunge in homebuilding,” said Ken Simonson, AGC’s chief economist. “The materials cost surges that plagued the industry in 2004-06 have slowed dramatically, and labor remains available in most markets.

“The worsening slide in homebuilding and turmoil in the credit markets threaten some types of nonresidential construction. At the same time, some materials costs are beginning to turn up again, and labor costs have started to accelerate.”

Construction costs are rising faster than wholesale goods prices, resulting in some projects being canceled, delayed or redesigned, AGC said.