Construction material prices increased 1.3% in January and are up 4.9% on a year-over-year basis, according to www.abc.org.
Nonresidential construction material prices rose 1.1% from December 2022 to January and increased 4.9% compared with one year ago. Softwood lumber prices are down 44.1% year-over-year and 5.1% from December 2022 to January. Iron and steel prices are down 23% year-over-year and up 0.5% for the month. Natural gas rose 7.9% from December 2022 to January and is up 219.4% since February 2020. Crude petroleum fell 10% for the month and is up 50% since February 2020.
“Recent employment and retail sales reports indicate that the economy is not slowing nearly as quickly as predicted,” said ABC Chief Economist Anirban Basu. “That is the good news. The bad news is that the economy remains overheated, a phenomenon neatly reflected in the January PPI data, which indicated that construction input price gains accelerated on a monthly basis. For instance, construction machinery and equipment prices expanded 3.4% in January and are up more than 12% during the past year.
“The implication is that the Federal Reserve will maintain higher interest rates longer,” Basu continued. “Ironically, it is the current strength of the economy that makes a recession more likely sometime during the next 12 months. At some point, higher interest rates will meaningfully affect economic activity. With industry backlog high, according to ABC’s Construction Backlog Indicator, many nonresidential contractors will feel little to no effect from higher interest rates in 2023. But in certain construction segments and locations, these dynamics could make the next two years more challenging.”