Construction material prices rose 2.3% in May and are up 21.4% on a year-over-year basis, according to www.abc.org.
Nonresidential construction material prices rose 2.3% from April to May and increased 21.9% compared with one year ago. Prices rose in 10 of 11 subcategories. Softwood lumber prices are down 21.7% year-over-year and up 2.7% from April to May. Iron and steel prices are up 27.5% year-over-year and up 4.8% for the month. Natural gas rose 39.7% from April to May and is up 414% since February 2020. Crude petroleum fell 1.6% for the month and is up 107% since February 2020.
“Inflationary pressures show no signs of abating,” said ABC Chief Economist Anirban Basu. “For months, economists and others have been expecting inflation to peak and then subside. Instead, the Russia-Ukraine war has disturbed markets, driving energy prices higher. Those elevated energy prices are now circulating across the economy, affecting manufacturing and distribution, and there is little prospect for inflation to meaningfully subside during the weeks ahead.
“Federal Reserve policymakers will continue to aggressively combat inflationary pressures,” Basu continued. “But what the Federal Reserve most directly affects is demand for goods and services, not supply. By tightening monetary policy and raising interest rates, the Federal Reserve will suppress demand over the rest of the year. Eventually, suppliers will respond to diminished demand. This dynamic will quite likely drive the economy into recession either later this year or at some point in 2023."
Basu said he sees challenges ahead for contractors.
“Based on the historical lag between the performance of the economy and nonresidential construction spending, more difficult times could be ahead for contractors in 2024 or 2025,” Basu said. “Looking at the most recent reading of ABC’s Construction Confidence Index, contractors are already seeing momentum slow. The likely exception is public contractors, who will continue to benefit from stepped-up infrastructure spending.”