Dive brief:
- Construction input prices rose 1.5% in August, the first increase in six months, due to higher energy costs, according to a new report. Analysis of Builders and Associated Contractors from the US Bureau of Labor Statistics producer price index data released on Thursday.
- According to the report, overall construction costs remain 0.2% lower than a year ago, while non-residential input prices rose 0.2% from last year. Although the flattening of costs in the last six months suggested inflation had been coolingexpectations of continued price declines should remain in check, said Anirban Basu, ABC’s chief economist.
- “Anyone who thought the hyperinflation would simply disappear by the end of this year got a rude awakening this week,” Basu said. “Yesterday’s consumer price data and the current producer price index indicate that price growth remains problematic.”
Diving knowledge:
A sharp jump in diesel costs in August fueled a global rise in materials prices, according to a separate analysis by the Associated General Contractors of America.
Most other commodity prices were relatively unchanged, according to AGC officials.
“The sharp rise in diesel prices since July is a reminder that concerns about construction costs have not gone away,” said Ken Simonson, AGC’s chief economist. “An even bigger challenge for most contractors is find enough qualified workers to complete the many projects available to work on.”
The producer price index for diesel, which covers the selling price at the terminal or refinery rack, rose 34.6% in August, the biggest one-month jump since 1990, according to AGC . Simonson added that retail diesel prices have continued to rise since then and are up 77 cents per gallon in the past 10 weeks.
However, Basu said, while energy prices will likely grab the headlines, materials such as concrete and equipment also continued to show inflationary trends in August.
“There are many implications for construction contractors, including the fact that persistently high inflation will keep interest rates higher for longer,” Basu said. “ABC has been predicting this for months.”
Concrete product prices rose 0.5% in August, making them 8.7% higher on the year. Meanwhile, switching equipment prices rose 0.4% in August and were up 6.7% from a year ago.
“With labor costs still rising, consumers spending aggressively, oil-producing nations curtailing production and global supply chains reorganizing, there is reason to believe that future readings will also show that excess inflation is here to stay,” said Basu.
