Dive brief:
- The prices of construction inputs rose little by little marginally in August but have eased over the past year, according to an analysis by Associated Builders and Contractors, just as the Federal Reserve prepares to decide whether to cut interest rates next week.
- Overall construction costs rose 0.1 percent in August, according to the U.S. Bureau of Labor Statistics’ ABC analysis released Thursday. Over the past year, however, construction inputs declined by 0.7%, while non-residential costs fell by 0.9%.
- “Construction input prices have fallen by almost a full percentage point over the past year,” said Anirban Basu, ABC’s chief economist. “This is a welcome development for contractors.”
Diving knowledge:
Continued economic uncertainty has kept many contractors waiting profit margins to shrink over the next six months, according to ABC’s construction confidence index.
After all, construction costs are still about 40% higher than in February 2020 before the start of the global pandemic.
But lower material prices compared to last year, combined with the wide expected reduction in interest rates at the next Federal Reserve meeting, they are expected to provide some credit to contractors in the coming months, Basu said.
“The moderation in escalating materials prices, along with the easing of labor restrictions and the near certainty that the Federal Reserve will begin cutting interest rates at its next meeting, should provide some relief to contractors over the next few months,” Basu said.
Prices for all three energy subcategories declined significantly in August, according to data from the US Census Bureau. Natural gas prices fell 29.8% in August, while unprocessed energy materials and crude oil fell 7.5% and 4.2%, respectively.
This is a positive trend for contractors, com energy cost growth last month had caused overall construction inputs to jump despite the stabilization of most other construction materials.
For example, prices of building materials such as brick, structural clay tile, construction machinery and switchgear were unchanged from the previous month, the data showed. Other materials, including concrete, gypsum products and hot-rolled steel bars, posted slight price declines over the past 30 days, said Macrina Wilkins, senior research analyst at the Associated General Contractors of America.
“During the past year, prices for diesel fuel, concrete pipe, steel products, copper and structural metals showed the most significant changes,” Wilkins said in an email to Construction Dive. “[That reflects] some volatility within a relatively stable market.”
