Construction input prices decreased 1.3% on both a monthly and yearly basis in June, according to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics’ Producer Price Index data released today. This is the first time in nearly three years that input prices have fallen on a year-over-year basis.
Overall, nonresidential construction input prices declined 1.4% from May 2019 but are down just 0.8% from June 2018. Among the 11 sub-categories, only natural gas (+1.6%) and concrete products (+0.9%) prices increased compared to May 2019. On a yearly basis, three of the sub-category prices have declined by more than 20%, including softwood lumber (-23.1%), crude petroleum (-22.2%) and natural gas (-22.3%).
“Eighteen months ago, surging construction materials prices represented one of the leading sources of concern among construction executives,” said ABC Chief Economist Anirban Basu. “That was a time of solid global economic growth and the first synchronized worldwide global expansion in approximately a decade. Yet things can change dramatically in a year and a half. According to today’s data release, construction materials prices are falling, in part a reflection of a weakening global economy.
“Given that the United States is in the midst of its lengthiest economic expansion with an unemployment rate at approximately a 50-year low, such low inflation remains a conundrum,” said Basu. “However, the June PPI numbers indicate that those commodities exposed to global economic weakness have been the ones to experience declines in prices, with the exception of concrete products and natural gas. While America has begun to export more natural gas, today’s prices largely reflect the domestic demand and supply.
“With the global economy continuing to stumble, there is little reason to believe that materials prices will bounce back significantly,” said Basu. “Of course, trade issues and other disputes can quickly alter the trajectories of prices. If economic forces are allowed to play out, contractors should be able to focus the bulk of their attention on labor compensation costs and worry relatively less about materials prices.”
Related Stories
Resiliency | May 17, 2018
Architects brief lawmakers and policy-makers on disaster recovery as hurricane season approaches
Urge senate passage of disaster recovery reform act; Relationship-building with local communities.
Market Data | May 17, 2018
These 25 cities have the highest urban infill development potential
The results stem from a COMMERCIALCafé study.
Market Data | May 10, 2018
Construction costs surge in April as new tariffs and other trade measures lead to significant increases in materials prices
Association officials warn that the new tariffs and resulting price spikes have the potential to undermine benefits of tax and regulatory reform, urge administration to reconsider.
Market Data | May 7, 2018
Construction employers add 17,000 jobs in April and 257,000 for the year
Unemployment rate for construction increases slightly compared to year earlier as higher pay levels appears to be attracting people with recent construction experience back into the workforce.
Market Data | May 2, 2018
Construction employment increases in 245 metro areas between March 2017 & 2018, as trade fights & infrastructure funding shortfalls loom
Houston-The Woodlands-Sugar Land, Texas and Weirton-Steubenville, W.Va.-Ohio experience largest year-over-year gains; Baton Rouge, La. and Auburn-Opelika, Ala. have biggest annual declines.
Market Data | May 2, 2018
Nonresidential Construction down in March, private sector falters, public sector unchanged
February’s spending estimate was revised roughly $10 billion higher.
Market Data | Apr 30, 2018
Outlook mixed for renewable energy installations in Middle East and Africa region
Several major MEA countries are actively supporting the growth of renewable energy.
Market Data | Apr 12, 2018
Construction costs climb in March as wide range of input costs jump
Association officials urge Trump administration, congress to fund infrastructure adequately as better way to stimulate demand than tariffs that impose steep costs on contractors and project owners.
Market Data | Apr 9, 2018
Construction employers add 228,000 jobs over the year despite dip in March
Average hourly earnings increase to $29.43 in construction, topping private sector by nearly 10%; Association officials urge updating and better funding programs to train workers for construction jobs.
Market Data | Apr 4, 2018
Construction employment increases in 257 metro areas between February 2017 & 2018 as construction firms continue to expand amid strong demand
Riverside-San Bernardino-Ontario, Calif. and Merced, Calif. experience largest year-over-year gains; Baton Rouge, La. and Auburn-Opelika, Ala. have biggest annual declines in construction employment.
