Construction Input Prices Dropped Slightly in Sept. - Modern Distribution Management

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Construction Input Prices Dropped Slightly in Sept.

Construction input prices dipped 0.1% in September compared to the previous month but remained 41% ahead of February 2020 pre-COVID levels.
Diverse Team of Specialists Inspect Commercial, Industrial Building Construction Site. Real Estate Project with Civil Engineer, Investor and Worker. In the Background Crane, Skyscraper Formwork Frames

Construction input prices dipped 0.1% between August and September but remained 41% ahead of pre-pandemic prices from February 2022, according to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics’ Producer Price Index data released Oct. 12.

Nonresidential construction input prices also fell 0.1% for the month, according to ABC’s analysis.

Construction input prices are up 16.3% from 2021, while nonresidential construction input prices are 15.9% higher.

Input prices were down in six of 11 subcategories on a monthly basis, ABC said:

  • Steel mill prices fell 6.7%, and iron and steel prices dropped 5.4%.
  • Natural gas prices rose 3.1%, but crude petroleum prices were down 3.4% in September.
  • Overall producer prices jumped 0.4% in September, a larger increase than the consensus estimate of 0.2%.

“Investors and other stakeholders are eagerly awaiting any indications of meaningful declines in inflationary pressures,” ABC chief economist Anirban Basu said. “Elevated inflation and interest rate increases have not only undone momentum in America’s homebuilding industry but also threaten the entire global economy. There are already indications of growing financial stress, including at banking giant Credit Suisse. This is bad news for the heavily financed real estate and construction segments.”

Basu added: “While many American nonresidential contractors remain upbeat, according to ABC’s Construction Confidence Index, there are significant threats looming over the industry. Next year stands to be a weak one for the U.S. economy as it continues to absorb the impacts of rapidly rising borrowing costs. Today’s PPI release strongly suggests that there is no impending end to the Federal Reserve’s rate-tightening, which means that negative factors threatening the broader economy and nonresidential construction are only getting stronger. While nonresidential input prices fell slightly, inflation came in hotter than anticipated in the overall report. For contractors, the upshot is that they should be actively preparing their respective balance sheets for a downturn, even as many firms presently operate at capacity.”

ABC also announced this week that the construction backlog indicator increased to nine months in September from 8.7 months in August, according to a member survey conducted Sept. 20 to Oct. 5.

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