Construction Input Prices Trend Lower This Summer
Prices for inputs to construction industries declined 0.1% in July after increasing 0.2% in June, according to the Aug. 14 producer price index release by the Bureau of Labor Statistics.
Year-over-year prices were down 3% in July and have been down on an annual basis for each of the past eight months. Prices of inputs to nonresidential construction industries declined 0.3% on a monthly basis and are down 3.9% on a yearly basis.
“Key input prices fell or were flat in all but one category in July, and it is important to note that further downward pressure on input costs is likely to be reflected in next month’s report, as well,” said Associated Builders and Contractors Chief Economist Anirban Basu.
“The state of affairs today is unprecedented,” said Basu. “Nonresidential construction spending has been recovering robustly in the U.S. in recent months—up more than 11% on a year-over-year basis. On top of that, the multifamily building boom continues in most major U.S. metropolitan areas.
“All things being equal, these circumstances should correspond with rising construction materials prices,” said Basu. “But as a reflection of how global the economy has become, America’s nonresidential construction recovery is taking place in the context of collapsing commodity prices. The latest round of commodity price decreases has been spawned by softening growth in China and ongoing increases in production of key inputs worldwide, including oil,” he said.
“However, this form of deflation should not be troubling to contractors. If anything, it will tend to boost profit margins for the average contractor, though falling commodity prices do not represent good news for construction firms heavily invested in oil and natural gas segments,” Basu added. “These falling prices also imply slower increases in interest rates going forward, which will help extend the ongoing nonresidential construction recovery.”
Below are the key input prices for the month and the year.
• Prices for plumbing fixtures remained flat on a monthly basis and are up 1.2% on a year-over-year basis.
• Softwood lumber prices expanded 6.2% in July but are 3.7% lower than a year ago.
• Concrete product prices fell 0.1% in July but are up 3.8% on a yearly basis.
• Crude energy materials prices declined 6.2% in July and are down 37.8% on a year-over-year basis.
• Fabricated structural metal product prices fell 0.7% for the month and have declined 0.4% on a year-over-year basis.
• Natural gas prices declined 1.9% in July and are 38.4% lower than the same time a year ago.
• Iron and steel prices were down 1.1% in July and are down 15% from the same time last year.
• Prices for prepared asphalt, tar roofing and siding fell 0.1% for the month and are down 0.4% on a year-ago basis.
• Steel mill products prices fell 1% for the month and are 13.2% lower than a year ago.
• Crude petroleum prices fell 12.3% in July and are down 48.8% from the same time a year ago.
• Nonferrous wire and cable prices fell 1.3% on a monthly basis and are down 5.2% on a yearly basis.