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News Sept. 15, 2022

Construction material prices fell in August

Construction material prices decreased 1.4% in August but are up 16.7% on a year-over-year basis, according to

Nonresidential construction material prices fell 1.4% from July to August but increased 16.3% compared with one year ago. Prices were up in six of 11 subcategories. Softwood lumber prices are up 14.8% year-over-year and down 3.1% from July to August. Iron and steel prices are down 5.7% year-over-year and 5.1% for the month. Natural gas rose 35.3% from July to August and is up 457.9% since February 2020. Crude petroleum fell 5.3% for the month and is up 89.6% since February 2020.

“Until yesterday's Consumer Price Index report, investors and other market-watchers had been delighted by recent inflation news,” said ABC Chief Economist Anirban Basu. “Today’s Producer Price Index report supplies additional evidence that wholesale inflation is edging lower from the highs observed earlier this year. While this may create a sense of relief among contractors, this is no time for complacency.

“With COVID-19 lockdowns persisting in China, the world’s leading manufacturer, and Europe facing severe energy crises, supply chain disruptions will persist,” Basu continued. “That suggests that construction materials and equipment prices are likely to remain elevated even if year-over-year price increases moderate. Public construction workers remain in short supply, including in the category of public construction. The upshot is that inflation is poised to remain stubbornly high even as some begin to declare victory. Estimators and others in the construction industry should be on guard for occasional surges in inflation during the months ahead.”

Basu said ABC’s Construction Confidence Index and Backlog Indicator indicate many contractors expect to pass along their cost increases to project owners during the coming months and may be in for an unpleasant surprise.

“With borrowing costs rising and risk of recession elevated, it is perfectly conceivable that project owners will become increasingly resistant to elevated charges for the delivery of construction services,” Basu said. “Based on nonresidential construction spending data, that process has already begun. Accordingly, contractors should remain laser-focused on cashflow and weeding out costs as opportunities arise.”


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