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News Dec. 13, 2018

Construction material prices decreased in November

An Associated Builders and Contractors (ABC) analysis of information provided by the Bureau of Labor Statistics (BLS) shows construction material prices decreased 1.8 percent from October to November, according to www.abc.org. On a year-over-year basis, the price of construction materials increased 5.3 percent.

Nonresidential construction material prices decreased 1.7 percent from October to November.

"In general, contractors should find today's report to be packed with positive data," says ABC Chief Economist Anirban Basu. "Earlier in 2018, materials prices were racing skyward due to a combination of strong domestic demand, a synchronized global economic recovery, pervasive increases in asset prices, and tariffs imposed on steel, softwood lumber and other inputs.

"Yet circumstances have changed materially," he continues. "The global economy has weakened in intervening months, which implies that demand for key productive inputs is no longer expanding rapidly. Rather than consistently rising, various asset prices have exhibited mores volatility. Given growing economic and financial uncertainty around the world, more investors have crowded into U.S. dollar-denominated assets as safe havens, pushing the value of the greenback higher, which also can suppress materials price increases. Moreover, the quantity of domestic production of certain key inputs appears to have risen in the context of higher prices earlier this year, including oil, softwood lumber and steel."

Basu says contractors likely can expect moderate price increases in early 2019.

"The impact of expanding domestic production can be observed in the data," Basu says. "For instance, steel mill product prices are up nearly 19.8 percent compared to a year ago but rose just 0.5 percent in November. Softwood lumber prices, which increased sharply earlier this year, are now down nearly 11 percent compared to last year and fell 3 percent in November. With the global economy expected to continue to weaken and the dollar expected to remain strong, contractors should expect only moderate increases in materials prices during the early months of 2019, though further declines in input prices are certainly possible."

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