November Brings Largest 12-mo Increase in Construction Input Prices Since 2011

Prices for construction inputs expanded 0.7% in November and rose 5.6% above November 2016 levels, in the largest cost increase in six years

While ABC Chief Economist Anirban Basu hesitates to say construction material prices are spiking, they are definitely rising at their fastest pace in six years.
While ABC Chief Economist Anirban Basu hesitates to say construction material prices are spiking, they are definitely rising at their fastest pace in six years.
Associated Builders and Contractors

Construction input prices expanded 0.7% in November and rose 5.6% compared to November of 2016, the largest increase since November 2011, according to an Associated Builders and Contractors (ABC) analysis of Bureau of Labor Statistics data. Nonresidential construction materials prices also expanded 0.7% for the month and 5.4% for the year. Crude petroleum prices rose 11% in November and are 31% higher than this time last year.

“It would be an exaggeration to suggest that construction materials prices are spiking,” said ABC Chief Economist Anirban Basu. “However, in the aggregate, materials prices are now rising at their fastest rate in six years. As always, there are many factors at work, but undoubtedly one of them is the ongoing improvement in the global economy and continued rapid growth in a number of emerging nations. Growth has also been accelerating in much of the advanced world, including the United States, Japan and much of Europe.

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“Global growth is expected to hasten next year,” said Basu. “That should induce stable-to-rising global commodity prices next year, at least during January. That said, there is little reason to believe that materials prices will skyrocket as they did during periods both prior to and immediately after the financial crisis. Higher prices trigger more quantity supplied, which in turn helps to suppress price momentum.

“Still, contractors must be prepared to deal with steadily rising costs of delivering construction services,” said Basu. “This will place more pressure on estimators who must increasingly build into their bids the possibility of cost increases over the course of individual projects. Labor shortages continue to represent the number one concern of construction firms in America, but materials price inflation can no longer be ignored.”

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