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 | Aug 29, 2017
Hidden opportunities emerge from construction industry challenges
JLL’s latest construction report shows stability ahead with tech and innovation leading the way.
Market Data | Aug 28, 2017
U.S. hotel construction pipeline is up 7% year-over-year
For the economy, the rate of growth may be low but it’s running on all cylinders.
Market Data | Aug 23, 2017
Architecture Billings Index growth moderates
“The July figures show the continuation of healthy trends in the construction sector of our economy,” said AIA Chief Economist, Kermit Baker.
Architects | Aug 21, 2017
AIA: Architectural salaries exceed gains in the broader economy
AIA’s latest compensation report finds average compensation for staff positions up 2.8% from early 2015.
Market Data | Aug 20, 2017
Some suburban office markets are holding their own against corporate exodus to cities
An analysis of mortgage-backed loans suggests that demand remains relatively steady.
Market Data | Aug 17, 2017
Marcum Commercial Construction Index reports second quarter spending increase in commercial and office construction
Spending in all 12 of the remaining nonresidential construction subsectors retreated on both an annualized and monthly basis.
Industry Research | Aug 11, 2017
NCARB releases latest data on architectural education, licensure, and diversity
On average, becoming an architect takes 12.5 years—from the time a student enrolls in school to the moment they receive a license.
Market Data | Aug 4, 2017
U.S. grand total construction starts growth projection revised slightly downward
ConstructConnect’s quarterly report shows courthouses and sports stadiums to end 2017 with a flourish.
Market Data | Aug 2, 2017
Nonresidential Construction Spending falls in June, driven by public sector
June’s weak construction spending report can be largely attributed to the public sector.
Market Data | Jul 31, 2017
U.S. economic growth accelerates in second quarter; Nonresidential fixed investment maintains momentum
Nonresidential fixed investment, a category of GDP embodying nonresidential construction activity, expanded at a 5.2% seasonally adjusted annual rate.