Construction Material Prices Inch Down in July

Despite a 0.2% decrease this month, construction material prices are 9.5% higher than a year ago

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Prices for inputs to construction fell 0.2% in July but are 9.5% higher than a year ago, according to an Associated Builders and Contractors (ABC) analysis of U.S. Bureau of Labor Statistics data. Nonresidential construction input prices fell 0.3% in July but are up 9.6% year over year. Softwood lumber prices are up 19.5% from July 2017, while iron and steel prices are up 13.4%.

“The monthly decline in construction input prices registered in July represents a departure from the recent trend,” said ABC Chief Economist Anirban Basu. “As is often the case, the question for the economist is how much weight to place on the most recent data point.

“In this instance, placing significant weight on July's PPI release would be equivalent to suggesting that the surge in materials prices has ended,” said Basu. “Putting less weight on the most recent bit of data means that July represents a statistical aberration, and that prices will rise in ways similar to the period preceding July.

“Given the ongoing strength of the U.S. construction sector and ongoing trade tussles, it would be difficult to conclude that the rise in materials prices is over,” said Basu. “It may be the case, however, that the pace of increase in materials prices is set to slow as suppliers ramp up production of key inputs in the wake of higher prices and as the U.S. dollar remains strong. In any case, it is far too early for estimators, chief financial officers and others to conclude that the construction input inflation cycle is over.”