Construction cost index up slightly in July

Input prices rose 0.3 percent for month, says ABC

Prices for materials and other costs involved in construction increased by 0.3 percent in July and are up 3 percent on a year-over-year basis, according to an Associated Builders and Contractors analysis of data released by the federal Bureau of Labor Statistics.

Eight of 11 key construction input prices rose in July. Among the inputs experiencing declines in prices were crude petroleum (down 8 percent) and natural gas (down 7 percent). Natural gas prices have fallen during four of the past six months.

“Perhaps the most astonishing aspect of U.S. economic performance in recent years has been the general lack of inflation,” said ABC Chief Economist Anirban Basu. “Despite recently completing eight years of economic recovery and hurtling towards full employment, the Federal Reserve’s most intensely scrutinized measure of inflation remains well below 2 percent. Even worker compensation has not risen rapidly, despite indications by construction firms, trucking enterprises, hotel operators and manufacturers of large-scale shortfalls in human capital.”

But Basu said there are certain categories where “the rise in prices has been noteworthy.” Among them are iron and steel and softwood lumber, which have each experienced price increases of about 10 percent over the past 12 months.”

That, coupled with the stabilization of energy prices, a strengthening global economy and a weakening dollar, means that “the construction producer price index is likely to exhibit faster growth during the months ahead.”

Categories: Real Estate & Construction