Construction material prices inch down in July

Although material prices were down slightly in July, economists say that the overall trend of escalating prices could continue in the coming months.

August 9, 2018
Edited by Adam Redling

Prices for inputs to construction fell 0.2 percent in July but are 9.5 percent higher than a year ago, according to an Associated Builders and Contractors (ABC) analysis of U.S. Bureau of Labor Statistics data released Aug. 9. Nonresidential construction input prices fell 0.3 percent in July but are up 9.6 percent year over year. Softwood lumber prices are up 19.5 percent from July 2017, while iron and steel prices are up 13.4 percent.

“The monthly decline in construction input prices registered in July represents a departure from the recent trend,” ABC Chief Economist Anirban Basu says. “As is often the case, the question for the economist is how much weight to place on the most recent datapoint.

“In this instance, placing significant weight on July's PPI release would be equivalent to suggesting that the surge in materials prices has ended. Putting less weight on the most recent bit of data means that July represents a statistical aberration, and that prices will rise in ways similar to the period preceding July.

“Given the ongoing strength of the U.S. construction sector and ongoing trade tussles, it would be difficult to conclude that the rise in materials prices is over. It may be the case, however, that the pace of increase in materials prices is set to slow as suppliers ramp up production of key inputs in the wake of higher prices and as the U.S. dollar remains strong. In any case, it is far too early for estimators, chief financial officers and others to conclude that the construction input inflation cycle is over.”