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
Contractors | Jun 26, 2019
Katerra launches apprenticeship program to help develop the future of construction
The program offers nationally recognized, portable construction trade credentials.
Building Tech | Jun 26, 2019
Modular construction can deliver projects 50% faster
Modular construction can deliver projects 20% to 50% faster than traditional methods and drastically reshape how buildings are delivered, according to a new report from McKinsey & Co.
Contractors | Jun 15, 2019
Turner tops off new classroom space at Middle Tennessee State University
The building includes a “command center” for training students to interact with emergency personnel.
Contractors | May 24, 2019
Two versions of a hard hat for the future are ready for production
Clayco worked with a Georgia college to design a hard hat with greater comfort and adaptability.
Contractors | May 20, 2019
SoCal’s oldest GC bounds into second century
C.W. Driver succeeds by sticking to core markets and practices.
Codes and Standards | Apr 25, 2019
Report: Contractors invest $1.6 billion in workforce development annually
ABC members increased training spending 45% from 2013, according to a new report.
Resiliency | Apr 22, 2019
Turner Construction doubles down on jobsite efficiency
The company targets a 50% cut in greenhouse gas emissions and water use from construction activities by 2030.
Building Tech | Apr 19, 2019
Skender, Z Modular reach agreement to fabricate multifamily housing components
Factory to open soon on the southwest side of Chicago.
Contractors | Apr 15, 2019
Do you have a fear of getting 'Uber'd'? Join the club
Exacerbating the AEC talent shortage is the coming mass exodus of baby boomers as they reach retirement age.
Contractors | Apr 15, 2019
Suffolk launches Smart Lab in Los Angeles
The lab will identify, test, and scale new technologies to help advance the construction industry.