Dive brief:
- Construction input prices fell 0.6% in December, largely due to falling oil prices, according to a new analysis of builders and associated contractors from the U.S. Bureau of Labor Statistics’ producer price index data released Friday.
- The decline marks three consecutive months of price moderation, although volatility remains on the cards, said Anirban Basu, ABC’s chief economist. Overall construction costs remain 1.2% higher than a year ago, while non-residential construction input prices are 1.6% more expensive.
- “Most input prices were domestic in the last month of 2023,” Basu said in the statement. “This serves as a fitting end to a year in which aggregate input prices rose by just 1.2% and many individual commodity prices fell.”
Diving knowledge:
Despite continued moderation in material prices and other positive momentum around inflation, the cost outlook for construction materials still carries inherent risks, Basu said.
“Piracy in the Red Sea and the resulting diversion of Suez Canal ships around the Cape of Good Hope has caused global freight rates to almost double in the first two weeks of 2024, according to the Freightos Baltic Index,” Basu said. “All the same, rising shipping costs will increase pressure on certain inputs.”
Even before Friday’s report, Ken Simonson, chief economist at the Associated General Contractors of America, expressed similar concerns, noting in December that despite consecutive months of cost declines, material volatility was not “completely dead”.
For example, iron and steel increased by 4.3% in December and are still 1.9% more expensive than in December 2022. Similarly, concrete products registered an increase of 0, 1% in December and remain 7.3% more expensive than 12 months ago. Other materials, including construction sand, gravel, crushed stone, copper wire and cable, also posted cost increases in December, according to the US Bureau of Labor Statistics.
