February sees sharp rise in construction input prices amid inflation trends

by Christopher Brinckerhoff | 17 April 2024 6:00 am

Construction input prices increased 1.4 percent in February compared to January, and nonresidential construction input prices increased 1.3 percent.
*Image courtesy Associated Builders and Contractors (ABC)*

Construction input prices increased 1.4 percent in February compared to January, according to an Associated Builders and Contractors (ABC)[2] analysis of the U.S. Bureau of Labor Statistics’ Producer Price Index data. Nonresidential construction input prices increased 1.3 percent for the month.

Overall construction input prices are 1.5 percent higher than a year ago, while nonresidential construction input prices are 1.8 percent higher. Prices increased in two of the three energy subcategories in February. Crude petroleum input prices were up 7.5 percent, while unprocessed energy materials were up 3.6 percent. Natural gas prices declined 7.2 percent in February.

“For the last several weeks, inflation data have been coming in hotter than anticipated,” says ABC chief economist Anirban Basu. “This was also true for the February construction input price data, which indicated that upward price pressures are re-emerging after a period of calm. Monthly inflation was apparent in several categories, including brick/tile, gypsum, and steel mill products. With supply chains around the world rattled by military conflicts and other phenomena, and workers’ wages far higher than they once were, there is reason to believe that inflation will remain stubbornly high for months to come.

“For contractors, [this data] release is bad news for at least two reasons,” says Basu. “First, higher input prices implicate lower demand for construction services, all else equal. With project financing costs already elevated, project owners are less likely to move forward with construction work, given already high and rising input costs.

“Second, recent inflation data render it more likely that interest rates will remain higher for longer. For weeks, the conventional wisdom has been that the Federal Reserve was poised to reduce interest rates. [This] inflation data, along with other releases, suggest that hopes for rapidly declining rates were somewhat premature.”

Endnotes:

[Image]: https://www.metalconstructionnews.com/wp-content/uploads/2024/04/ABC_InputPricesFeb24_1.png
Associated Builders and Contractors (ABC): https://www.abc.org/

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