An Associated Builders and Contractors analysis of information provided by the Bureau of Labor Statistics shows construction material prices rose 4.6% from April to May, according to www.abc.org. On a year-over-year basis, the price of construction materials increased 24.3%.
Nonresidential construction material prices rose 4.8% from April to May and increased 23.9% compared with one year ago. Softwood lumber prices are up 154% year-over-year, and iron and steel prices are up 62.8%.
“Many economists continue to believe that the surge in prices is temporary, the result of an economic reopening shock,” said ABC Chief Economic Anirban Basu. “To a large extent, they are correct. The cure for high prices is high prices. When prices are elevated, suppliers have greater incentive to boost capacity and bolster output. That dynamic eventually results in a downward shift in prices. Operations at input producers should also become smoother over time as staff is brought back and standard operating procedures are reestablished.
“Still, there are some things that have changed during the pandemic and will not shift back,” said Basu. “For instance, money supply around the world has expanded significantly. Governments have been running large deficits. This means that some of the inflationary pressure that contractors and others are experiencing may not be temporary, and that inflation and interest rates may not be as low during the decade ahead as they were during the decade leading up to the pandemic.”