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 | Mar 22, 2018
Architecture billings continue to hold positive in 2018
Billings particularly strong at firms in the West and Midwest regions.
Market Data | Mar 21, 2018
Construction employment increases in 248 metro areas as new metal tariffs threaten future sector job gains
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.
Market Data | Mar 19, 2018
ABC's Construction Backlog Indicator hits a new high: 2018 poised to be a very strong year for construction spending
CBI is up by 1.36 months, or 16.3%, on a year-over-year basis.
Market Data | Mar 15, 2018
ABC: Construction materials prices continue to expand briskly in February
Compared to February 2017, prices are up 5.2%.
Market Data | Mar 14, 2018
AGC: Tariff increases threaten to make many project unaffordable
Construction costs escalated in February, driven by price increases for a wide range of building materials, including steel and aluminum.
Market Data | Mar 12, 2018
Construction employers add 61,000 jobs in February and 254,000 over the year
Hourly earnings rise 3.3% as sector strives to draw in new workers.
Steel Buildings | Mar 9, 2018
New steel and aluminum tariffs will hurt construction firms by raising materials costs; potential trade war will dampen demand, says AGC of America
Independent studies suggest the construction industry could lose nearly 30,000 jobs as a result of administration's new tariffs as many firms will be forced to absorb increased costs.
Market Data | Mar 8, 2018
Prioritizing your marketing initiatives
It’s time to take a comprehensive look at your plans and figure out the best way to get from Point A to Point B.
Market Data | Mar 6, 2018
Persistent workforce shortages challenge commercial construction industry as U.S. building demands continue to grow
To increase jobsite efficiency and improve labor productivity, increasingly more builders are turning to alternative construction solutions.
Market Data | Mar 2, 2018
Nonresidential construction spending dips slightly in January
Private nonresidential construction fell 1.5% for the month, while public sector nonresidential spending increased 1.9%.