Dive brief:
- Construction input prices rose 0.4% in March due to inflationary pressures and escalating supply chain problems, according to new analysis of builders and associated contractors of producer price index data from the US Bureau of Labor Statistics published on Thursday.
- Input prices have now risen every month of 2024, offsetting the three months of moderation that ended 2023. Both general construction and non-residential costs remain 1.7% higher than last year, according to the report
- “This is not particularly good news for those who buy construction services,” said Anirban Basu, ABC’s chief economist. “If it weren’t for the drop in energy prices, the headline figure for the dynamics of construction input prices would have been significantly higher.”
Diving knowledge:
Earlier this week, the consumer price index also in March increased more than expected for the third consecutive month, according to the Bureau of Labor Statistics. Ken Simonson, chief economist at the Associated General Contractors of America, echoed Basu’s sentiment that growing evidence of resurgent inflation is negative for nonresidential construction activity.
“Not much to get excited about,” Simonson said in an email to Construction Dive. “Extreme lead times are still occurring for electrical equipment: large transformers and switchgear, sometimes elevator or HVAC parts.”
According to the statement, prices rose for 10 of the 20 commodities tracked by the ABC. According to the U.S. Bureau of Labor Statistics, materials such as softwood lumber rose 3.2% in the past month, while copper wire and cable rose 1.6%. On the other hand, prices fell in all three energy subcategories in March.
Along with inflation, a new set of supply chain issues is also driving up material costs, Basu said. This includes the rising cost of insuring ships, bottlenecks in the Red Sea, capacity pressures in the Panama Canal and the collapse of the Key Bridge in Baltimore.
“In addition to the supply chain issues, there is a huge amount of public and private funding megaprojects throughout the countrymassively increasing demand for certain inputs,” Basu said. “And most contractors expect their sales to pick up over the next six months.”
That means expecting construction project financing to remain expensive relative to historical norms for the foreseeable future, Basu said.
