Prices for inputs to construction fell 0.5% in August but are 8.1% higher than at the same time one year ago, according to an Associated Builders and Contractors analysis of Bureau of Labor Statistics data released today. Nonresidential construction input prices fell 0.4% in August but are up 8.3% year-over-year. Softwood lumber prices plummeted 9.6% in August yet are up 5% on a yearly basis (down from a 19.5% increase year-over-year in July).
“Stakeholders will be tempted to look upon this month’s inputs to the construction Producer Price Index report as evidence that the cycle of rapidly rising prices is nearing an end,” said ABC Chief Economist Anirban Basu. “Prices of key inputs have been high for quite some time, which would tend to induce a larger supply of these items and, in turn, moderate prices.
“Some may also conclude that ongoing progress in trade negotiations with nations including Mexico and Canada has helped to moderate input prices. Still others might point to growing economic turmoil in nations like Turkey and Argentina. Economists would also note the likely impact of a strong U.S. dollar on import and commodity prices. While all of these are potential explanations, another possibility is that the August data are largely statistical aberrations. Metal prices continue to move higher on a monthly basis, with recently enacted tariffs representing a likely explanation.
“Softwood lumber, the subject of an ongoing trade dispute with the Canadians, experienced a significant dip in price on a monthly basis,” said Basu. “The price of softwood may have fallen in response to a weakening single-family residential construction market, as home builders have been wrestling with a combination of labor shortages, higher land prices and weakening demand due to higher mortgage rates.
“In the final analysis, the falling input prices trend likely won’t continue,” said Basu. “The economy is still strong, and ABC’s Construction Backlog Indicator remains elevated in both public and private construction segments. Inflation expectations have shifted, with purchasers of construction services now anticipating price increases and therefore more willing to accommodate them. Moreover, issues related to tariffs and trade wars persist. Accordingly, estimators and construction companies continue to consider the likelihood of additional input price increases for the balance of 2018 and into 2019.”
Related Stories
Market Data | Jul 6, 2020
Nonresidential construction spending falls modestly in May
Private nonresidential spending declined 2.4% in May and public nonresidential construction spending increased 1.2%.
Market Data | Jul 6, 2020
Construction industry adds 158,000 workers in June but infrastructure jobs decline
Gains in June are concentrated in homebuilding as state and local governments postpone or cancel roads and other projects in face of looming budget deficits.
Market Data | Jul 6, 2020
5 must reads for the AEC industry today: July 6, 2020
Demand growth for mass timber components and office demand has increased as workers return.
Market Data | Jul 2, 2020
Fall in US construction spending in May shows weakness of country’s construction industry, says GlobalData
Dariana Tani, Economist at GlobalData, a leading data and analytics company, offers her view on the situation
Market Data | Jul 2, 2020
6 must reads for the AEC industry today: July 2, 2020
Construction spending declines 2.1% in May and how physical spaces may adapt to a post-COVID world.
Market Data | Jul 1, 2020
Construction spending declines 2.1% in May as drop in private work outweighs public pickup
Federal infrastructure measure can help offset private-sector demand that is likely to remain below pre-coronavirus levels amid economic uncertainty.
Market Data | Jul 1, 2020
7 must reads for the AEC industry today: July 1, 2020
Facebook to build $800 million data center and 329 metro areas added construction jobs in May.
Market Data | Jun 30, 2020
AIA releases strategies and illustrations for reducing risk of COVID-19 in senior living communities
Resources were developed as part of AIA’s “Reopening America: Strategies for Safer Buildings” initiative.
Market Data | Jun 30, 2020
329 metro areas added construction jobs in May
Seattle-Bellevue-Everett, Wash. added the most construction jobs (28,600, 44%) in May.
Market Data | Jun 29, 2020
6 must reads for the AEC industry today: June 29, 2020
HQ tower features gardens on every floor and the head of Hilton talks about how his business will survive.