According to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics data released today, construction material prices rose another 0.8% in June and are 9.6% higher than they were at the same time one year ago.
June represents the latest month associated with rapidly rising construction input prices. Nonresidential construction materials prices effectively mirrored overall construction prices by rising 0.9% on a month-over-month basis and 9.8% on a year-over-year basis.
“In general, this emerging state of affairs is unfavorable,” said ABC Chief Economist Anirban Basu. “Rapidly rising materials prices interfere with economic progress in numerous ways, including by making it less likely that a particular development will move forward. They also increase the cost of delivering government-financed infrastructure, raise costs for final consumers such as homeowners, renters and office tenants, and exacerbate overall inflationary pressures, which serves to push nominal borrowing costs higher.
“Materials prices are up roughly 10% in just one year, and certain categories have experienced significant rates of price increase,” said Basu. “Among these are key inputs that appear to have been impacted by evolving policymaking, including the price of crude petroleum, which is up 49% over the past year, iron and steel, which is up nearly 14%, and softwood lumber, up 23%.
“Some contractors may note the similarities between the current period and the period immediately preceding the onset of the global financial crisis,” said Basu. “Materials prices, for instance, were rising rapidly for much of 2006 and 2007 as the economic expansion that began in 2001 reached its final stages. Today’s data will provide further ammunition for policymakers committed to tightening monetary policy and raising short-term interest rates.
“With no end in sight regarding the ongoing tariff spat between the United States and a number of leading trading partners, and with the domestic economy continuing to expand briskly, construction input prices are positioned to increase further going forward, though the current rate of increase appears unsustainable.”
Related Stories
Data Centers | Jan 28, 2016
Top 10 markets for data center construction
JLL’s latest outlook foresees a maturation in certain metros.
Market Data | Jan 20, 2016
Nonresidential building starts sag in 2015
CDM Research finds only a few positive signs among the leading sectors.
Market Data | Jan 20, 2016
Architecture Billings Index ends year on positive note
While volatility persists, architecture firms reported healthy performance for 2015.
Market Data | Jan 15, 2016
ABC: Construction material prices continue free fall in December
In December, construction material prices fell for the sixth consecutive month. Prices have declined 7.2% since peaking in August 2014.
Market Data | Jan 13, 2016
Morgan Stanley bucks gloom and doom, thinks U.S. economy has legs through 2020
Strong job growth and dwindling consumer debt give rise to hope.
Hotel Facilities | Jan 13, 2016
Hotel construction should remain strong through 2017
More than 100,000 rooms could be delivered this year alone.
Market Data | Jan 6, 2016
Census Bureau revises 10 years’ worth of construction spending figures
The largest revisions came in the last two years and were largely upward.
Market Data | Jan 5, 2016
Majority of AEC firms saw growth in 2015, remain optimistic for 2016: BD+C survey
By all indications, 2015 was another solid year for U.S. architecture, engineering, and construction firms.
Market Data | Jan 5, 2016
Nonresidential construction spending falters in November
Only 4 of 16 subsectors showed gains
Market Data | Dec 15, 2015
AIA: Architecture Billings Index hits another bump
Business conditions show continued strength in South and West regions.