An Associated Builders and Contractors analysis of information provided by the Bureau of Labor Statistics shows construction material prices rose 0.9 percent in February, according to abc.org. On a year-over-year basis, the price of construction materials increased 1.8 percent.
Nonresidential construction material prices increased 1 percent from January to February and increased 2.7 percent compared with one year ago. This is the first-time prices have risen on a monthly basis since October 2018.
"While the monthly increase in materials prices was quite substantial, it makes more sense to focus on the year-over-year statistics," says ABC Chief Economist Anirban Basu. "Several factors were at work when materials prices were expanding very rapidly, including a synchronized global expansion and the initial effects of tariffs on items such as steel, aluminum and softwood lumber. At the time, year-over-year increases in materials prices were routinely in the double digits in percentage terms."
"Today, the annualized increase in materials prices is less than 2 percent, despite the data characterizing February," Basu continues. "Some of this is explained by the dip in oil prices during the past year, which is due in part to a softening global economy and a significant increase in U.S. oil production. However, other key construction materials prices also have declined during the last 12 months, including natural gas, nonferrous wire and cable and softwood lumber."
Basu says the price increase is unlikely to continue.
"With the global economy continuing to weaken, it is unlikely that materials prices will surge in the near term, despite a still very active U.S. nonresidential construction sector," said Basu. "It is quite conceivable that much of the monthly increase in materials prices registered in February was associated with unusually severe winter weather in much of the nation. Difficulties involving transportation, for instance, have a tendency to push purchase prices higher. The implication is that the monthly increase registered in February will probably not be repeated in March and April."