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Construction material prices decreased in July

An Associated Builders and Contractors (ABC) analysis of information provided by the Bureau of Labor Statistics shows construction material prices decreased 0.2 percent from June to July, according to www.abc.org. On a year-over-year basis, the price of construction materials increased 9.5 percent.

Nonresidential construction material prices decreased 0.3 percent from June to July and increased 9.6 percent between July 2017 and July 2018.

"The monthly decline in construction input prices registered in July represents a departure from the recent trend," says ABC Chief Economist Anirban Basu. "As is often the case, the question for the economist is how much weight to place on the most recent data point.

"In this instance, placing significant weight on July's PPI release would be equivalent to suggesting that the surge in materials prices has ended," Basu continues. "Putting less weight on the most recent bit of data means that July represents a statistical aberration, and that prices will rise in ways similar to the period preceding July."

Basu says though the rise in materials prices may not be over, the pace of the increase may be slowing.

"Given the ongoing strength of the U.S. construction sector and ongoing trade tussles, it would be difficult to conclude that the rise in materials prices is over," Basu says. "It may be the case, however, that the pace of increase in materials prices is set to slow as suppliers ramp up production of key inputs in the wake of higher prices and as the U.S. dollar remains strong. In any case, it is far too early for estimators, chief financial officers and others to conclude that the construction input inflation cycle is over."


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