Construction Input Prices Surge to Start 2017, ABC Says Energy Prices Remain on the Ascent

WASHINGTON, D.C. – Construction input prices collectively rose by 1 percent on a monthly basis and 3.8 percent on a year-over-year basis, according to analysis of U.S. Bureau of Labor Statistics data released by Associated Builders and Contractors. This represents the fastest year-over-year rate of materials price inflation since the beginning of 2012. Nonresidential input prices rose 0.9 percent for the month and are up 4 percent year over year.

The rise in input prices is largely attributable to natural gas prices, which expanded 23.6 percent for the month and are up 81.8 percent year over year. Crude petroleum prices slipped 5.5 percent for the month, but are up 77.5 percent for the year

“Despite a still-strong U.S. dollar, input prices have continued to rise in recent weeks,” said ABC Chief Economist Anirban Basu. “There are a number of factors at work, including some evidence that global demand for various materials has begun to firm, including in China. Chinese economic growth was solid last year and ended 2016 on a strong note. There are also indications that U.S. economic growth is set to accelerate due in part to an expected pickup in business investment.

“While demand has been firming, certain suppliers have been taking active steps to suppress supply,” said Basu. “OPEC reached an agreement late last year to curb output, helping to bring oil prices above $50/barrel, where they have remained. Concerns regarding trade wars and tariffs may have also helped to push commodity prices higher.

“The question is whether these forces will continue to dominate,” said Basu. “They may not as natural gas prices have been falling for much of February, perhaps the result of seasonality. U.S. oil production appears set to rise in the context of higher prices, which could also help to lower prices. Finally, the global economic outlook remains shaky despite relatively upbeat near-term projections for the U.S. economy.”