Dive brief:
- Construction input prices rose again by 1% in January, largely due to increases in energy costs, according to a new analysis of the U.S. Bureau of Labor Statistics producer price index for builders and associated contractors released Friday.
- The jump marks the first overall price increase after three months of moderation, highlighting the continued presence of material price volatility, said Anirban Basu, ABC chief economist. Overall construction costs remain 0.4% higher than a year ago, while non-residential construction input prices rose 0.7% over the past 12 months.
- “Construction material prices rose in January, ending a streak of three consecutive monthly declines,” Basu said in the statement. “While this represents the largest monthly increase since August 2023, input prices are essentially unchanged over the past year, up less than half a percentage point.”
Diving knowledge:
Prior to the report, Ken Simonson, chief economist of the Associated General Contractors of America, had already expressed concern that material volatility “wasn’t quite dead”, even with the three months of price contractions.
He added in December that high interest rates, tight capital requirements and extreme lead times for certain materials continue to hamper overall construction activity. especially in the private sector. Basu also noted that interest rates may continue to remain high.
“The broadest PPI measure of prices received by all domestic producers of final demand goods and services rose 0.3% in January, well above the expected 0.1% increase,” he say Basu. “This, along with the hotter-than-expected consumer price index data released earlier this week, suggests the Federal Reserve may keep interest rates high for longer than expected. ‘I expected”.
Crude oil prices rose 6.1% in January, followed by a 5.4% increase in steel products, according to data from the US Bureau of Labor Statistics. Other materials, such as iron and steel, also rose 3.5% in January.
However, despite the overall jump of 1% in January, prices have remained largely unchanged over the past 12 months. For that reason, many contractors still expect their profit margins to widen over the next six months, Basu said.
