Construction material prices rise in September

October 15, 2020

An Associated Builders and Contractors analysis of information provided by the Bureau of Labor Statistics shows construction material prices rose 1.6% from August to September, according to www.abc.org. On a year-over-year basis, the price of construction materials increased 1.1%.

Nonresidential construction material prices rose 1.4% from August to September and increased 0.5% compared with one year ago.

“Rising materials prices represent yet another risk facing nonresidential contractors going forward,” said ABC Chief Economist Anirban Basu. “For months, many contractors have expressed concern that global supply chain disruptions would produce a combination of materials shortages and rising prices. Indeed, many contractors have reported occasional issues procuring necessary inputs to production, further slowing construction service delivery. This has been reflected in ABC’s Construction Confidence Index, which showed a mere 23% of contractors expect their profit margins to expand over the next two quarters. But in general, materials prices have not raced higher as feared, with the noteworthy exception of softwood lumber.”

However, Basu said that may be changing.

“Materials prices expanded nearly 2% in September and are now higher than they were at the same time last year,” Basu said. “Despite the lingering pandemic, the global economy has been recovering, increasing demand for key commodities. Rapid viral spread, including in Europe and parts of North America, render materials shortages more likely during the winter months. Were Congress to pass a stimulus package under current conditions, especially one offering a meaningful infrastructure component, materials prices could rise even faster.

“But fears of persistently rising materials prices may be overblown,” Basu continued. “For now, Congress is not focused on passing a near-term stimulus. The pace of economic expansion has been softening recently, and the global economy is poised to slow during the winter months as economic shutdowns have begun to reappear. All of this suggests potentially softening demand for materials during the months ahead, which would help to suppress rapid price increases.”

Tags: Trends

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