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
| Feb 23, 2011
Call for Entries: 2011 Building Team Awards, Deadline: March 25, 2011
The 14th Annual Building Team Awards recognizes newly built projects that exhibit architectural and construction excellence—and best exemplify the collaboration of the Building Team, including the owner, architect, engineer, and contractor.
| Feb 23, 2011
Green building on the chopping block in House spending measure
Bryan Howard, Legislative Director of the U.S. Green Building Council, blogs about proposed GOP budget cuts that could impact green building in the commercial sector.
| Feb 22, 2011
LEED Volume Program celebrates its 500th certified Pilot Project
More than 500 building projects have certified through the LEED Volume Program since the pilot launched in 2006, according to the U.S. Green Building Council. The LEED Volume Program streamlines the certification process for high-volume property owners and managers, from commercial real estate firms, national retailers and hospitality providers, to local, state and federal governments.
| Feb 15, 2011
New 2030 Challenge to include carbon footprint of building materials and products
Architecture 2030 has just broadened the scope of its 2030 Challenge, issuing an additional challenge regarding the climate impact of building products. The 2030 Challenge for Products aims to reduce the embodied carbon (meaning the carbon emissions equivalent) of building products 50% by 2030.
| Feb 15, 2011
New Urbanist Andrés Duany: We need a LEED Brown rating
Andrés Duany advocates a "LEED Brown" rating that would give contractors credit for using traditional but low cost measures that are not easy to quantify or certify. He described these steps as "the original green," and "what we did when we didn't have money." Ostensibly, LEED Brown would be in addition to the current Silver, Gold and Platinum ratings.
| Feb 14, 2011
Sustainable Roofing: A Whole-Building Approach
According to sustainability experts, the first step toward designing an energy-efficient roofing system is to see roof materials and systems as an integral component of the enclosure and the building as a whole. Earn 1.0 AIA/CES learning units by studying this article and successfully completing the online exam.
| Feb 11, 2011
Four Products That Stand Up to Hurricanes
What do a panelized wall system, a newly developed roof hatch, spray polyurethane foam, and a custom-made curtain wall have in common? They’ve been extensively researched and tested for their ability to take abuse from the likes of Hurricane Katrina.
| Feb 11, 2011
RS Means Cost Comparison Chart: Office Buildings
This month's RS Means Cost Comparison Chart focuses on office building construction.
