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Monthly Construction Input Prices Drop in March

Construction input prices fell 1 percent in March from the previous month, according to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics’ Producer Price Index data released April 9. The aggregate price of inputs to construction is down 1.9 percent compared to the same time last year. Nonresidential construction input prices fell 1.1 percent for the month and 2 percent during the past year.

    

Among 11 construction input subcategories, six experienced year-over-year price decreases. Prices fell in all three energy-related subcategories in March, with crude petroleum down 34.6 percent, unprocessed energy materials down 19.1 percent and natural gas down 1.5 percent. Softwood lumber experienced the largest monthly increase, 4.6 percent.

    

“Deflationary pressures are weighing on economies around the world during this period of pandemic,” said ABC Chief Economist Anirban Basu. “Demand for various items has dried up as much of the global economy remains in a period of suspended animation.

    

“Though fragmenting supply chains are also creating shortages for a number of inputs, many producers still have an incentive to deliver what they can to the marketplace in order to maintain some degree of cashflow,” said Basu. “Accordingly, there has been more downward pressure on prices from weak demand than upward pressure from interrupted production.

    

“Deflationary pressures are likely to persist into the summer,” said Basu. “That said, there may come a time during the third and fourth quarters of the current year when input prices begin to surge higher as construction projects come back to life in larger numbers during a period of flattened construction input inventories and lingering global supply chain issues. This has the potential to render circumstances for cash-strapped contractors even more dire. But for now, that scenario is highly speculative.”

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