Construction input prices see slight January climb
Construction input prices rose slightly by 1.3% in January, according to an Associated Builders and Contractors analysis of the U.S. Bureau of Labor Statistics’ Producer Price Index data released today.
Overall construction input prices are 4.9% higher than a year ago, which is the smallest annual increase since January 2021. Nonresidential construction input prices are also up 4.9% since January 2022.
Inputs to multifamily construction increased 1.1% in January and are up 5.4% from February 2022. But prices have jumped 35.7% since February 2020, when the pandemic began to heighten.
Lumber and wood products declined 0.6% for the month and fell 12.3% year-over-year. Prices remain 28.7% above the level of February 2020, however.
Softwood lumber prices saw a 5.4% decrease for the month and have plunged 44.1% since January 2022. Compared to February 2020, prices are up 17%.
Gypsum product prices are down 2.6% for the month but are elevated by 10.7% in comparison to January 2022 prices. In comparison to February 2020, gypsum product prices are up 42.7%.
“Recent employment and retail sales reports indicate that the economy is not slowing nearly as quickly as predicted,” said ABC Chief Economist Anirban Basu. “That is the good news. The bad news is that the economy remains overheated, a phenomenon neatly reflected in the January PPI data, which indicated that construction input price gains accelerated on a monthly basis.”
Basu noted that construction machinery and equipment prices expanded 3.4% in January and are up more than 12% during the past year.
“The implication is that the Federal Reserve will maintain higher interest rates longer,” said Basu. “Ironically, it is the current strength of the economy that makes a recession more likely sometime during the next 12 months. At some point, higher interest rates will meaningfully affect economic activity."