Material and labor costs will continue a gradual upward climb in 2017, continuing to recover from recession lows. Even after the Federal Reserve’s small bump in the benchmark interest rate December 14, key costs should remain tame. That much said, there are potential wild cards that could throw off estimates, especially when it comes to steel.
Asphalt, which is made from oil, is an interesting example of stable price changes despite oil’s swings. Oil is gradually rebounding from lows that helped drive the price of asphalt paving mixtures and blocks down 3.2% and 5.5% in 2015 and 2016, respectively—far less than the fall of crude oil. Deni Koenhemsi, IHS Markit senor economist for price and purchasing, notes that because asphalt is an intermediate good that requires processing, asphalt prices never track oil’s ups and downs and “producers hold on to their asking number when [oil] prices are going up and down.”