Construction material prices fell 1.2% in October and are down 1.1% on a year-over-year basis, according to Associated Builders and Contractors. Prices in October were 39.6% higher than in February 2020.
Nonresidential construction material prices fell 1.1% from September to October and decreased 0.7% compared with one year ago. Softwood lumber prices are down 16.3% year over year and 3.2% from September to October. Iron and steel prices are down 6.1% year over year and 2.3% for the month. Natural gas rose 10.9% from September to October and is up 54.1% since February 2020. Crude petroleum fell 2.9% for the month and is up 76.6% since February 2020.
“The October construction materials prices report should be cheered by most contractors,” said ABC Chief Economist Anirban Basu. “Yesterday’s Consumer Price Index data and today’s Producer Price Index data indicate that inflation is declining. Not only does that translate into less rapid increases in the price of many key construction inputs, but it also signifies that the Federal Reserve is poised to begin reducing interest rates at some point next year. That will support an improving project financing environment, supporting demand for construction services in the process.
“That does not mean that all risks have disappeared,” Basu continued. “Among the reasons for inflation’s retreat is a slowing economy. While financial markets have been laser-focused on good news on the inflation front in recent days, less attention has been invested in the downside risks to the economy, including growing consumer indebtedness, tighter credit conditions, geopolitics and the impact of the federal government’s insatiable appetite to take on more debt.”