Construction input prices rose 2.1% in February 2021, according to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics’ Producer Price Index data released today. Nonresidential construction input prices also increased 2.1% for the month.
Construction input prices are up 7.6% from February 2020, and nonresidential construction input prices have expanded 7.1% during that span. Softwood lumber and natural gas have experienced the largest year-over-year increases, rising 79.7% and 76.2%, respectively. Prices in the iron and steel category increased 22.0% compared to the same time last year, and steel mill product prices are up 20.0%.
“Anyone who questions whether or not the inflation story is real should look at today’s Producer Price Index,” said ABC Chief Economist Anirban Basu. “Input prices are rising rapidly even in the midst of the global COVID-19 pandemic that continues to suppress economic growth in many parts of the world, including Europe and Latin America. If anything, these conditions should create flat prices, but the injection of massive levels of monetary and fiscal stimulus into the global economy, along with occasional supply chain issues, have produced a nearly 8% rise in construction input prices over the past year.
“As vaccinations become more pervasive around the world, additional stimulus is injected into various economies, and the global economy reopens in earnest, the pace of price increases could further accelerate,” said Basu. “According to ABC’s Construction Confidence Index, only 36% of contractors expect their profit margins to increase over the next six months. Meaningful inflation would almost certainly lower that share. ABC is indicating to its members that they should be very careful in crafting their contracts, given the risk of future materials price increases. The risk is real. Today’s data release does nothing to alter that prescription.”