Construction prices continue upward trajectory
Construction input prices expanded 0.3 percent on a monthly basis and 4.8 percent on a year-over-year basis in February, according to an analysis of U.S. Bureau of Labor Statistics data. This represents the most rapid yearly growth in construction input prices in more than five years.
Only four key inputs tracked by BLS experienced monthly price declines, principally natural gas. Natural gas prices declined 18 percent in February but still are up by more than 66 percent over the past year. Crude petroleum prices are up 107 percent over the past year.
There is growing evidence of inflationary pressures throughout the economy, and construction materials prices are no exception.
After declining during the latter half of 2014 and throughout 2015, global commodity prices have begun to stabilize. There are many reasons for this, including a somewhat more stable global economy, decisions by producers to reduce supply, general increases in asset prices and expansionary monetary policy in much of the advanced world.
Still, contractors should not worry excessively about prospects for massive additional increases in materials prices. The global economy hardly is poised to boom given structural factors like demographics and indebtedness. The U.S. dollar has continued to strengthen, which has helped to keep a lid on commodity price increases. Moreover, energy prices have begun to retrench recently, including oil prices, which fell below $50 per barrel earlier this month.
Of course, if the Trump administration is successful in implementing a proposed $1 trillion infrastructure package, dynamics will change. Under those circumstances, concrete and other materials prices stand to rise vigorously.
Anirban Basu is chief economist with Associated Builders and Contractors.