Monthly, Yearly Construction Input Prices Stumble in June
Monthly fluctuations are common, which is why construction economists weren't surprised to see a decrease in June's construction input prices. What experts didn't expect was the same decrease in year-over-year readings for the first time in nearly three years.
On July 12, Associated Builders and Contractors (ABC) reported a 1.3% decrease in month-over-month (MoM) as well as year-over-year (YOY) input prices.
"Eighteen months ago, surging construction materials prices represented one of the leading sources of concern among construction executives," ABC Chief Economist Anirban Basu said in the report. "That was a time of solid global economic growth and the first synchronized worldwide global expansion in approximately a decade. Yet things can change dramatically in a year and a half. According to [the July 12] data release, construction materials prices are falling, in part a reflection of a weakening global economy."
An analysis of inputs to nonresidential construction revealed a MoM decrease of 1.4%; however, less than a percent decreased YOY. Crude petroleum was the biggest culprit behind the MoM plummet after falling nearly 15%. Unprocessed energy materials followed with a 7.5% MoM decrease in addition to substantial declines in softwood lumber, and iron and steel. Softwood lumber, natural gas and crude petroleum were hit the hardest YOY, all falling more than 22%.
Natural gas and concrete products were the only materials to improve MoM—the latter also improving YOY—while YOY improvements were seen in plumbing fixtures and fittings, fabricated structural metal products, and prepared asphalt, tar roofing and siding products.
"With the global economy continuing to stumble, there is little reason to believe that materials prices will bounce back significantly," Basu noted. "Of course, trade issues and other disputes can quickly alter the trajectories of prices. If economic forces are allowed to play out, contractors should be able to focus the bulk of their attention on labor compensation costs and worry relatively less about materials prices."
—Andrew Michaels, editorial associate