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News Oct. 12, 2018

Construction material prices increased in September

An Associated Builders and Contractors (ABC) analysis of information provided by the Bureau of Labor Statistics shows construction material prices increased 0.3 percent from August to September, according to www.abc.org. On a year-over-year basis, the price of construction materials increased 7.4 percent.

Nonresidential construction material prices increased 0.4 percent from August to September.

"Last month, government data indicated that construction materials prices declined in August," says ABC Chief Economist Anirban Basu. "At that time, we viewed the one-month decline as an aberration. With the U.S. construction industry remaining active, as demonstrated by recent patterns in hiring, demand for materials domestically remains strong. Moreover, a combination of global economic growth and geopolitical intrigue has helped to push certain commodity prices higher, including crude oil, which is up 47 percent year-over-year, and natural gas.

"There is also the matter of trade tensions, including those involving key construction materials like steel and softwood lumber," Basu continues. "While new trade agreements have been signed with the likes of Mexico, South Korea and Canada, certain trade issues linger, including U.S. tariffs imposed on foreign steel and aluminum for reasons ostensibly related to national security. All of this is consistent with both elevated and rising construction materials prices."

Basu says expectations for the future include rising material costs.

"Today's data are consistent with the view that the prior month's data were anomalous," Basu says. "Nonresidential contractors should continue to expect both rising material and human capital costs going forward. Understanding these dynamics is, of course, particularly salient to the daily lives of estimators, who arguably have today's most difficult construction job."

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