“Construction input prices surged again in August, and the increases were widespread across materials,” said Anirban Basu, chief economist with Associated Builders and Contractors (ABC).
Prices for iron and steel, softwood lumber, switchgear, copper wire and cable, and several derivative metal products are now up more than 10% year over year, Basu added.
According to an ABC analysis of the U.S. Bureau of Labor Statistics’ Producer Price Index data, construction input prices increased 1.2% in August compared to the previous month. Nonresidential construction input prices increased by the same percentage.
| Inputs to industries | 1-month % change | 12-month % change | Change since Feb 2020 |
|---|---|---|---|
| Inputs to construction | 1.2% | 8.9% | 55.6% |
| Inputs to multifamily construction | 1.0% | 7.4% | 53.8% |
| Inputs to nonresidential construction | 1.2% | 8.8% | 56.4% |
| Inputs to commercial construction | 0.9% | 7.4% | 56.4% |
| Inputs to healthcare construction | 1.1% | 7.4% | 56.0% |
| Inputs to industrial construction | 1.1% | 8.1% | 52.9% |
| Inputs to other nonresidential construction | 1.4% | 9.4% | 56.8% |
| Inputs to maintenance and repair construction | 1.3% | 9.5% | 54.1% |
Indeed, metals remain a significant source of cost pressure. Steel mill product prices increased 1.7% in August and are up 23.4% over the past 12 months. Since February 2020, prices have more than doubled, rising 103.4%.
Iron and steel prices increased 0.9% for the month and 17.9% year over year. Compared with February 2020, prices are up 80.8%.
Prices for hot rolled steel bars, plates, and structural shapes were unchanged in August, but remain 13.4% higher than a year ago and 63% above February 2020 levels.
Overall construction input prices are 8.9% higher than one year ago, while nonresidential construction input prices are 8.8% higher.
Although contractors remain optimistic about their margins, Basu believes the ongoing input price escalation will likely weigh on profitability over the next several months.
“This is especially true given recent escalation in the trade war with Canada and the fact that oil prices have jumped back above $100 per barrel.”
