With an unstable economy and escalating gas prices, every sector of the market is tightening their belts and making concessions, including the construction industry.

Construction material costs are at an all-time high, according to the Associated Builders and Contractors trade association. Builders are seeing price hikes on concrete, steel and stone bloat construction budgets. And in some cases, the inflation is even affecting the bidding process.

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In a recent interview with Baton Rouge Business Report, construction company President Jim Beard expressed concern about the future of several projects his firm has been handling. “If prices continue to escalate and do not stabilize in the near future, it is uncertain if these projects will move forward in 2009. The projects may no longer be feasible.”

On the east coast, things don’t appear too bleak. Well, not yet, according to Kevin Tartaglione, president of New Jersey-based Advanced Realty.

“I haven’t seen a construction slow down due to gas, that’s just the way the market is,” says Tartaglione. “It’s just one factor.”

But he, too, has seen the price of materials jump, especially petroleum-based supplies.

“If the prices continue to go up, you’re definitely going to see a lot more construction-related issues because you’re not getting the return you’re looking for. It’s a domino effect,” says Tartaglione.

The numbers don’t look encouraging. Construction costs have leapt 10.4 percent as of June, the largest annual increase in over 20 years. Demand has dropped as well, with sales of commercial and residential properties continuing to fall as home foreclosures skyrocket. And some experts, like Center for Economic and Policy Research Co-Director and Huffington Post� contributor Mark Weisbrot warn that the worst is yet to come.

“All the indicators of a serious recession are swirling around us. Consumer confidence has dropped to a 28-year low, a level not seen since Jimmy Carter was president,” wrote Weisbrot in May. “Home foreclosure filings are up 65 percent over last year, and now commercial real estate prices are heading south, dropping 6.2 percent in the first quarter.”

As developers scramble to cut costs to feed the octane monster, construction projects are slowing down or coming to an abrupt halt. “Gas raises all of the costs associated with moving the project,” says Voit Development Associate Carter Harrington. “There aren’t a lot of development projects being sold, or even meeting pro formas.”

According to the Bureau of the Department of Commerce, spending on residential construction was down $6.2 billion in May, while non-residential construction was up $1 billion, exceeding earlier estimates. It remains to be seen just how much gas is left in the economy’s tank.