Dive Brief:
- Construction input prices rose 0.3% in October, driven by rising costs in all energy subcategories, according to an analysis by Associated Builders and Contractors.
- Despite rising costs, construction input prices remain 0.2% lower than a year ago, and non-residential construction input prices are down 0.5% over the period.
- “High energy prices drove the increase in construction input prices seen in October,” said Anirban Basu, ABC chief economist. “While prices for some other materials, such as concrete and copper products, also rose during the month, overall input prices are lower than a year ago and have fallen 5% since reaching a all-time high in June 2022.”
Diving knowledge:
The increase in fuel prices will likely be temporary, said Ken Simonson, chief economist for the Associated General Contractors of America. However, the wider uncertainty is linked to possible changes in trade policy under the the incoming Trump administration it introduces a new layer of unpredictability for contractors.
“A bigger concern is the prospect of blanket tariffs that President-elect Trump has said he intends to impose,” Simonson said. “New or increased tariffs have the potential to raise prices for a wide range of construction inputs, including domestically produced items that compete with imports.”
Crude oil and copper futures, which are usually reliable predictors of upcoming changes in the producer price index, have recently fallen. This indicates the potential for a near-term drop in energy input costs, he said.
Contractors have greatly benefited from the stabilization of input prices in 2024. From October, contractors expect their profit margins to expand until the first quarter of 2025.
That may change next year as it remains unclear how material prices will react in 2025 due to the proposed tariffs, Basu said.
“The trade policy of the next administration increases the uncertainty about the costs of construction materials,” Basu said. “Beyond the implications of potential tariffs, input prices may rise in the short term if buyers rush to import materials before the implementation of these policies.”
