Dive brief:
- construction input prices rose 0.2% in September, mainly due to rising energy costs, according to a Builders and Contractors Association analysis of producer price index data from the U.S. Bureau of Labor Statistics released Wednesday.
- Overall construction input prices are 0.3% higher than a year ago, while non-residential construction input prices are 0.6% higher, according to a statement announcing the figures. This follows a Increase in the price of materials by 1.5% in Augustthe first in six months.
- “Today’s PPI report indicates that while inflationary pressures persist across the economy, increases in material prices are no longer at the heart of this bout of excess inflation,” said the ABC Chief Economist Anirban Basu. “Today, inflation is driven less by supply chain issues and more by structural labor market dynamics and geopolitics.”
Diving knowledge:
The increase in prices was mainly due to an increase in energy costs. In September, prices increased in all three energy subcategories. While natural gas saw a jump of just 0.1%, crude oil and unprocessed energy materials rose 10.1% and 7.5%, respectively.
Basu stressed that global armed conflicts present a wild card for how fuel costs will fare in the future. “Renewed conflict in parts of the world that produce a considerable amount of global energy could put more pressure on contractors in the coming months, but these things are hard to predict,” Basu said.
The gains reflect August’s escalating prices, which were also the result of energy jumps. A separate analysis by the Associated General Contractors of America last month found that the diesel producer price index increased by 34.6% in August, the biggest one-month increase since 1990.
Despite these increases, most other commodities were flat in September. The biggest changes were steel products, which fell 3.7% month-on-month, along with iron and steel, which was down 2.4% from August.
When looking at other causes of rising prices, Basu said supply chain issues may not be the problem they once were. Instead, Basu noted that the labor shortage remains a major thorn in the side of many contractors, which could only be countered by a decline in activity that he does not currently anticipate.
“At this time, this sharp drop is not expected,” Basu said.
