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Dive brief:
- Construction input prices fell 0.3% in June due to fewer projects underway in several sectors, according to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics data released Friday.
- Both overall and non-residential construction costs remain 1.1% and 0.7% higher, respectively, than a year ago, according to the report.
- “Construction material prices edged lower in June, perhaps reflecting a decline in project starts in several construction segments and an associated drop in demand,” said Anirban Basu, ABC’s chief economist. “For example, input prices fell in the multifamily segment, where many contractors report a substantial decrease in demand for their services. The same was true for input prices in the commercial construction segments.”
Diving knowledge:
Amid concerns about the Federal Reserve’s approach to interest rates, it was reassuring to note that the consumer price index, a key measure of inflation, held steady for the month, he said Macrina Wilkins, Senior Research Analyst, Associated General Contractors of America.
This aligns with the broader trend of deceleration of inflation, added. This is a positive sign for rate cuts before the end of the year.
But Basu said that while CBA members continue to report both a steady backlog and confidence, reasons for concern still persist.
The Federal Reserve is still looking for data to indicate that the 2% inflation target will be reset soon, he said. That means any data to the contrary would likely prevent long-awaited interest rate cuts.
Further delays in interest rate cuts would hurt the outlook for the construction sector, Basu said.
Prices for insulating materials rose 2.1% in June and are up 6.7% from last year. Meanwhile, prices for industrial switchboard, switchboard and control equipment rose 1.7% in June, according to the US Bureau of Labor Statistics.
Costs rose in June in two of the three energy subcategories, led by a 36.3% increase in natural gas prices, the data showed. According to the report, the aggregate price of unprocessed energy materials rose 4.7%, while the price of crude oil fell 0.2% in June.
