Construction input prices rise in June

Following analysis of the U.S. Bureau of Labor Statics’ Producer Price Index, released today, Associated Builders and Contractors reported that construction input prices are up 20.1% from a year ago.

On a monthly basis, input prices were down in four of 11 subcategories in June, with the largest decline registered in the softwood lumber category falling 24.8% from the previous month. 

Year-over-year, softwood lumber prices are down 38.1%

All three energy subcategories experienced price increases, with natural gas prices rising 24.3% for the month. Crude petroleum saw a 19.4% rise from the previous month and has jumped 77.1% since a year ago. 

“It’s no secret that contractors and their customers have been walloped by massive increases in construction materials prices,” said ABC Chief Economist Anirban Basu. “That inflation continued through June, as reflected in the decline in profit margin expectations seen in the most recent reading of ABC’s Construction Confidence Index. But more recently, key commodity prices have declined, so it may be possible we have achieved peak inflation.

“Indeed, with much of the world at risk of recession, there is likely to be further downward pressure on commodity prices going forward,” Basu added. “Oil prices had been in the range of $120/barrel recently. As of this morning, the price of oil has dipped into the low $90s. Similarly, natural gas prices have been in decline.”

Basu points to global supply chains that are readjusting to disruptions caused by the Russia-Ukraine war. The war creates an ongoing risk of sudden spikes in certain commodity prices, but we appear to be entering a new phase in input price trajectory, the economist said.