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Relatively flat materials figures in recent months indicate contractors are finally experiencing relief from supply chain woes and price volatility, according to a new report.
- Construction input prices remained unchanged again in July, marking five consecutive months of no upward movement, according to a new Associated Builders and Contractors’ analysis of U.S. Bureau of Labor Statistics Producer Price Index data released Friday.
- Overall construction costs sit 3.1% lower than a year ago, while nonresidential input prices dipped 2.7% since last year, according to the report. Although overall inputs to construction still remain close to 40% higher than before the start of the COVID-19 pandemic, the flattening of costs over the past five months indicates that inflation has been cooling.
- “Goods prices continue to stagnate in the context of improved supply chains and a sluggish global economy,” said Anirban Basu, ABC chief economist, in the release. “It has been the improvement of supply chains that best explains recent positive economic outcomes in the U.S.”
Contractors are “finally seeing some relief from recent supply chain problems and price escalations,” according to a separate analysis from the Associated General Contractors of America.
But despite the stabilizing of inputs for most materials, prices did increase over the month for all three energy subcategories: natural gas, crude petroleum and unprocessed energy materials.
Natural gas prices pushed up 11% in July, while crude petroleum and unprocessed energy materials jumped 8.4% and 8%, respectively.
“With the exception of energy prices, which are heavily influenced by a cocktail of geopolitics, weather and investor frenzy, construction materials prices should be reasonably stable during the months to come,” said Basu. “As supply chains have normalized, unmet demand has been more readily satisfied.”
Those improved supply chains have helped push prices lower, contributing to the disinflation seen both in the consumer price index and producer price index, said Basu.
Nevertheless, one exception to stable construction materials costs may be construction equipment prices. The price of equipment increased nearly 2% on a monthly basis in July and nearly 10% over the past year.
Basu said, “many contractors continue to complain about lengthy lead times for equipment as the nation continues to expand spending on infrastructure.”
Meanwhile, AGC officials said that Buy America requirements for publicly funded projects will severely limit the supply of materials contractors can use and will increase costs. They noted the new requirements are so strict that many products currently made in the U.S. would not be compliant due to containing small components that are sourced from abroad.
“Federal officials continue to inhibit the ability of contractors to utilize an established diversified construction material supply chain by drumming up strict regulations,” said Stephen Sandherr, AGC CEO, in the release. “Infrastructure is needed now, and until we have the capability of keeping all manufacturing on U.S. soil, we need to take advantage of all resources available.”