An Associated Builders and Contractors analysis of information provided by the Bureau of Labor Statistics shows construction material prices increased 1.7% from February to March, according to www.abc.org. On a year-over-year basis, the price of construction materials increased 2.5%.
Nonresidential construction material prices increased 1.7% from February to March and 3.2% compared with one year ago.
"Construction input prices failed to rise as expected in 2018, but the last two months have ushered in a new trend," says ABC Chief Economist Anirban Basu. "Materials prices fluctuations should be viewed in the context of economic dynamics in China, which registered its softest economic growth in 28 years in 2018. As a result, Chinese policymakers have responded by racing to rejuvenate growth, which among other things would tend to increase the demand for productive inputs.
"At the same time, oil prices have been rising in North America due to a number of factors, including some recent weak inventory and efforts by the Organization of the Petroleum Exporting Countries producers to limit supply," Basu continues. "Accordingly, much of the increase in materials prices recorded in March related to crude petroleum. If the past is any indication, oil price increases are unlikely to be sustained, especially as Russia recently announced a decision to raise oil production, a natural response to higher prices and upward movement of profit margins."
Basu says he expects a slow rise in materials prices.
"The most likely outcome going forward is a gradual increase in materials prices," said Basu. "While China's growth may accelerate, Europe's economy continues to stumble, and there is evidence that industrial production in the United States is slowing, as well. While construction activity remains robust, that in and of itself is not enough to trigger rapid growth in input prices in the context of broader global dynamics."
