WASHINGTON, July 14 — Construction input prices increased 2.8% in June compared to the previous month, according to an Associated Builders and Contractors analysis of Producer Price Index data released today by the U.S. Bureau of Labor Statistics. Nonresidential construction input prices increased 2.9% for the month.
Construction input prices are 24.8% higher than a year ago, while nonresidential construction input prices are up 24.6% over that span. As has been the trend for several months, all three energy subcategories experienced significant year-over-year price increases. The price of crude petroleum has risen 108.8%, while natural gas and unprocessed energy materials prices have increased 105.9% and 83.5%, respectively. Though prices for softwood lumber are up 125.3% over the past year, they were down 2.1% on a monthly basis.
“The inflation drumbeat continues,” said ABC Chief Economist Anirban Basu. “With each passing month, the possibility that meaningful inflation will be long-lived increases. For various reasons ranging from sky-high shipping costs to labor shortages and global supply chain disruptions, construction input prices continue to march higher.
“While softwood lumber and energy prices have attracted a considerable share of attention recently, steel mill product prices are up nearly 88% over the past year and iron/steel prices are up more than 73%,” said Basu. “Those price increases are also worthy of headlines.
“This is becoming a real challenge for America’s nonresidential construction industry,” said Basu. “Not only are these rising materials prices likely to induce more project owners to delay project starts, but ongoing inflation also makes it more likely that the Federal Reserve will have to begin tightening monetary policy sooner than anticipated and with greater force. Should that occur, interest rates will be pushed higher, adding to project financing costs. That could further forestall nonresidential construction’s recovery despite ABC’s Construction Confidence Indicator suggesting rising contractor optimism.”
Visit abc.org/economics for the Construction Backlog Indicator and Construction Confidence Index, plus analysis of spending, employment, GDP and the Producer Price Index.