Nonresidential construction input prices remained flat in July, while input prices for both the nonresidential construction sector and construction as a whole remain 2.3% lower than they were a year ago.
The sluggish global economy and a competitive dollar are partly responsible for low input prices, said Anirban Basu, Associate Builders and Contractors (ABC) chief economist. “Persistently low prices have placed a lid on the quantity supplied in many input categories, which has helped prevent widespread materials price declines recently,” he said. “The result has been that many input prices have remained within a tight range after a period of remarkable volatility.”
As construction labor costs continue to rise, particularly in fast-growing communities in the southeast and Pacific northwest, low and stable materials prices are essential in maintaining profit margins, he said. “With demand no longer expanding briskly, construction firms may have greater difficulty passing cost increases along to purchasers of services. Unexpected increases in materials prices could therefore place significant downward pressure on industry margins.”
However, Basu said he doesn’t expect to see sudden price increases anytime soon as the same global forces hampering price growth now are predicted to remain in place this year.
ABC tracks in construction input price index 11 key inputs to the delivery of construction services in the U.S. The natural gas index rose the quickest in July to 108.3 from 77.2 in June, unprocessed energy materials jumped 5% to 137.5 in July steel mill products increased 3.1% to 174.1 in July, ABC said. Inputs like plumbing fixtures and fittings, fabricated structural metal products, nonferrous wire and cable, lumber and concrete products all increased less than a percentage point in July.
Meanwhile, crude petroleum was the only input in July that fell in price, by 6.1% to 122.7, ABC said.
- Nicholas Stern, editorial associate