Construction input prices decreased 1.4% in August compared to the previous month, according to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics Producer Price Index data released today. Nonresidential construction input prices fell 1.4% for the month as well.
Construction input prices are up 16.7% from a year ago, while nonresidential construction input prices are 16.3% higher. Input prices were up in six of 11 subcategories* on a monthly basis. Natural gas prices increased 35.3% (and are 457.9% higher than they were in February 2020), followed by unprocessed energy materials prices, which rose 13.5%. Crude petroleum prices were down 5.3% in August.
"Until yesterday's Consumer Price Index report, investors and other market-watchers had been delighted by recent inflation news," said ABC Chief Economist Anirban Basu. "Today's Producer Price Index report supplies additional evidence that wholesale inflation is edging lower from the highs observed earlier this year. While this may create a sense of relief among contractors, this is no time for complacency.
"With COVID-19 lockdowns persisting in China, the world's leading manufacturer, and Europe facing severe energy crises, supply chain disruptions will persist," said Basu. "That suggests that construction materials and equipment prices are likely to remain elevated even if year-over-year price increases moderate. Public construction workers remain in short supply, including in the category of public construction. The upshot is that inflation is poised to remain stubbornly high even as some begin to declare victory. Estimators and others in the construction industry should be on guard for occasional surges in inflation during the months ahead."
Based on ABC's Construction Confidence Index and Backlog Indicator, many contractors expect to pass along their cost increases to project owners during the months ahead," said Basu. "Some contractors may be in for a rude surprise. With borrowing costs rising and risk of recession elevated, it is perfectly conceivable that project owners will become increasingly resistant to elevated charges for the delivery of construction services. Based on nonresidential construction spending data, that process has already begun. Accordingly, contractors should remain laser-focused on cashflow and weeding out costs as opportunities arise."
![PPI Table Aug 22](/sites/default/files/inline-images/PPI_Table_Aug_22.jpeg)
![PPI Graph Aug 22](/sites/default/files/inline-images/PPI_Graph_Aug_22.jpeg)
Related Stories
Healthcare Facilities | Oct 4, 2019
Heart failure clinics are keeping more patients out of emergency rooms
An example of this building trend recently opened at Beaumont Hospital near Ann Arbor, Mich.
Giants 400 | Oct 3, 2019
Top 10 Convention Center Sector Construction Firms for 2019
Lendlease, Turner, Clark, and Webcor top the rankings of the nation's largest convention center sector contractors and construction management firms, as reported in Building Design+Construction's 2019 Giants 300 Report.
Giants 400 | Oct 3, 2019
Top 65 Cultural Sector Construction Firms for 2019
Whiting-Turner, Turner, PCL, Clark Group, and Gilbane top the rankings of the nation's largest cultural facility sector contractors and construction management firms, as reported in Building Design+Construction's 2019 Giants 300 Report.
Giants 400 | Oct 3, 2019
2019 Cultural Facility Giants Report: New libraries are all about community
The future of libraries is less about being quiet and more about hands-on learning and face-to-face interactions. This and more cultural sector trends from BD+C's 2019 Giants 300 Report.
3D Printing | Sep 17, 2019
Additive manufacturing goes mainstream in the industrial sector
More manufacturers now include this production process in their factories.
Codes and Standards | Sep 12, 2019
Illinois law sets maximum retainage on private projects
The change is expected to give contractors bigger checks earlier in project timeline.
Multifamily Housing | Sep 12, 2019
Meet the masters of offsite construction
Prescient combines 5D software, clever engineering, and advanced robotics to create prefabricated assemblies for apartment buildings and student housing.
Giants 400 | Sep 11, 2019
Top 95 Industrial Sector Contractors for 2019
Fluor, Clayco, Jacobs, ARCO, and Gray Construction top the rankings of the nation's largest industrial sector contractors and construction management firms, as reported in Building Design+Construction's 2019 Giants 300 Report.
Multifamily Housing | Sep 10, 2019
Carbon-neutral apartment building sets the pace for scalable affordable housing
Project Open has no carbon footprint, but the six-story, solar-powered building is already leaving its imprint on Salt Lake City’s multifamily landscape.
Giants 400 | Sep 9, 2019
2019 Industrial Sector Giants Report: Managing last mile delivery
This and more industrial building sector trends from Building Design+Construction's 2019 Giants 300 Report.