Construction input prices increase for the second straight month, says ABC

Construction input prices increase for the second straight month, says ABC

WASHINGTON, DC — Construction input prices rose 1.7% in March on a monthly basis, according to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics data released today. On a year-over-year basis, construction input prices are up 2.5%, and following a stretch of four consecutive months of input price decreases, March was the second straight month prices have risen in the aggregate. Inputs to nonresidential construction also increased 1.7% on a monthly basis and are up 3.2% compared to one year ago. 

Input price increases were broad-based. Eight of 11 construction sub-categories experienced price increases last month—fabricated structural metal products and concrete products were unchanged from February—with the only decrease coming from the prepared asphalt product category, which fell 2.9%. The largest monthly increases were in crude petroleum (+15.3%), unprocessed energy materials (+7.3%) and nonferrous wire and cable (+2.5%). The subcategories with the largest year-over-year price increases were steel mill products (+10.3%), prepared asphalt products (+8.4%) and natural gas (+8.1%).

“Construction input prices failed to rise as expected in 2018, but the last two months have ushered in a new trend,” said ABC Chief Economist Anirban Basu. “Materials prices fluctuations should be viewed in the context of economic dynamics in China, which registered its softest economic growth in 28 years in 2018. As a result, Chinese policymakers have responded by racing to rejuvenate growth, which among other things would tend to increase the demand for productive inputs.

“At the same time, oil prices have been rising in North America due to a number of factors, including some recent weak inventory and efforts by Organization of the Petroleum Exporting Countries producers to limit supply,” said Basu. “Accordingly, much of the increase in materials prices recorded in March related to crude petroleum. If the past is any indication, oil price increases are unlikely to be sustained, especially as Russia recently announced a decision to raise oil production, a natural response to higher prices and upward movement of profit margins.

“The most likely outcome going forward is a gradual increase in materials prices,” said Basu. “While China’s growth may accelerate, Europe’s economy continues to stumble, and there is evidence that industrial production in the United States is slowing as well. While construction activity remains robust, that in and of itself is not enough to trigger rapid growth in input prices in the context of broader global dynamics.”

Leave a Reply

Your email address will not be published. Required fields are marked *