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."
Related Stories
BIM and Information Technology | Jul 14, 2015
Nation’s first 'drone park' breaks ground in North Dakota
This is one of six testing sites around the country that are developing flight standards and evaluating the utility of drones for different tasks.
Sponsored | Building Team | Jul 10, 2015
Are you the wrong type of ‘engaged’ leader?
Much of what’s written about employee engagement focuses on how leaders can help their employees become more involved at work. But what about the leaders themselves?
Contractors | Jul 9, 2015
Opioid abuse blamed for increase in worker injuries, business losses
Insurance giant CNA says concerns are increasing in the construction industry.
Architects | Jul 7, 2015
Why AEC firms should be cultivating 'visible experts'
A new study pinpoints the true dollar value of having knowledge leaders and market shapers on your team.
Green | Jul 7, 2015
Philips sheds new light on growing fresh food indoors
A research center in The Netherlands is testing the latest techniques in urban farming.
Healthcare Facilities | Jul 6, 2015
The main noisemakers in healthcare facilities: behavior and technology
Over the past few decades, numerous research studies have concluded that noise in hospitals can have a deleterious effect on patient care and recovery.
Contractors | Jul 1, 2015
ABC: Nonresidential construction spending continues growth with stellar May
Through the first five months of 2015, nonresidential construction spending is having its second best year since the Census Bureau began tracking the metric in 2002, according to ABC.
Contractors | Jun 30, 2015
Arcadis report: Errors and omissions in contract documents leading cause of disputes in North America
While the value of disputes fell by nearly 14% in 2014, the time it took to resolve them lengthened substantially last year, according to a new report from Arcadis.
Contractors | Jun 28, 2015
Construction spending, despite some slowing, stays on healthy growth path
FMI’s latest forecasts find continued strengths in manufacturing, lodging, and office sectors.
Architects | Jun 23, 2015
Architecture Billings Index back to positive territory for May 2015
The American Institute of Architects reported the May ABI score was 51.9, up from a mark of 48.8 in April.
