Prices of Construction Materials Fall 0.3%

Construction input prices fell 0.3% in June compared to the previous month, according to an Associated Builders and Contractors’ analysis of U.S. Bureau of Labor Statistics Producer Price Index data. Nonresidential construction input prices declined 0.4% for the month.

Overall construction input prices are 1.1% higher than a year ago, while nonresidential construction input prices are 0.7% higher. Prices increased in 2 of 3 energy subcategories last month. Natural gas prices were up 36.3%. The aggregate price of unprocessed energy materials was up 4.7%. Crude petroleum prices were down 0.2% for the month.

“Construction materials prices dipped in June, perhaps a reflection of declining project starts in a number of construction segments and an associated dip in demand,” said ABC Chief Economist Anirban Basu. “For instance, input prices fell in the multifamily segment, where many contractors indicate substantial softening of demand for their services. The same was true of input prices in commercial construction segments.

“While ABC members continue to report stable backlog as measured by the Construction Backlog Indicator and steady confidence as measured by the Construction Confidence Index, there remain reasons for concern,” said Basu. “While construction input prices fell last month according to today’s report, overall inflation as measured by the Producer Price Index is hotter than anticipated. The Federal Reserve is still looking for data indicating that 2% inflation will soon be reestablished, so data like these may forestall much-anticipated and desired interest rate cuts. That translates into higher interest rates for longer, which would be damaging to construction industry prospects.”