Construction material prices increased 0.2% in March and are down 0.9% on a year-over-year basis, according to Associated Builders and Contractors. Although prices fell year over year for the first time since August 2020, they still are 39% higher than in February 2020.
Nonresidential construction material prices rose 0.4% from February to March and decreased 0.6% compared with one year ago. Softwood lumber prices are down 49.3% year over year and down 0.9% from February to March. Iron and steel prices are down 13.8% year over year and up 2.9% for the month. Natural gas fell 21.4% from February to March and is up 57.4% since February 2020. Crude petroleum fell 10.2% for the month and is up 42.6% since February 2020.
“Construction input costs are down on a year-over-year basis for the first time since August 2020,” said ABC Chief Economist Anirban Basu. “The good news is that the latest PPI data, which show broad-based declines in both goods and services prices, suggest that the expected 25 basis point interest rate hike at the Federal Reserve’s May meeting will be the last of the cycle.
“The bad news is that this data indicates greatly diminished pricing power among wholesalers and others,” Basu continued. “While some will cheer the notion that rate increases are set to end soon, the Federal Reserve may want to maintain higher interest rates for longer to ensure that inflation has been suppressed. This, along with other signs of slowing economic activity, suggests that the possibility of recession remains elevated, though the economic outlook is increasingly uncertain.”
