Monthly construction input prices remain stable in October, says ABC

Construction input prices remained virtually unchanged in October compared to the previous month, according to an Associated Builders and Contractors (ABC) analysis of the U.S. Bureau of Labor Statistics’ Producer Price Index data released today. Nonresidential construction input prices also remained unchanged for the month.

Construction input prices increased 1.1% between October 2019 and October 2020, while nonresidential construction input prices are up just 0.5% over that span. The higher increase in overall input prices is largely attributable to softwood lumber prices, which are up nearly 69% year-over-year.

“While contractors will face significant challenges during the months ahead, substantial increases in construction materials prices are likely not among them,” said ABC Chief Economic Anirban Basu. “Oil prices have been rising in recent months, but global supply-demand dynamics suggest that material prices will only rise modestly over the coming months. Declining prices are possible in many input categories.

“This has everything to do with COVID-19,” said Basu. “Economic lockdowns are becoming more pervasive in much of the advanced world as winter approaches. With infection rates and hospitalizations spiking in much of the northern hemisphere, including in both Europe and the United States, the economic recovery that began in the second quarter will likely be interrupted. That will translate into diminished demand for many global commodities, putting downward pressure on prices.

“As observed during the early months of the crisis, however, the pandemic also impacts and disrupts supply chains,” said Basu. “Not only would shortages of certain commodities limit price declines, it sets the stage for depleted inventories once economic recovery recommences. If there is a post-inauguration stimulus with a significant infrastructure component and the dissemination of a vaccine at some point next year, the conditions for sizeable increases in input prices would be in place. Accordingly, rapid increases in materials prices are not likely in the near-term but could surface in the latter parts of 2021.”