Softwood lumber prices showed big gains in July

Associated Builders and Contractors, the national trade association, reported that construction input prices increased 1.9% in July over the previous month.

The findings are based on the U.S. Bureau of Labor Statistics’ Producer Price Index data, released today. Nonresidential construction input prices are up 1.8% for the month.

Softwood lumber prices showed the biggest gains, rising 9.8% from June and soaring 25.7% from July 2019.

Prepared asphalt, tar roofing, and siding products are up 2.3% from the previous month and 4.1% from a year ago, while plumbing fittings and fixtures rose 2.2% in July and 1.5% from last year.

“The global and national economies have been coming back to life despite the lingering pandemic, helping to push construction materials prices higher,” said ABC Chief Economist Anirban Basu. “However, materials prices are still 2.4% lower than they were a year ago, which is largely a reflection of the massive hit to global and national economic output registered during the second quarter of 2020.”

Basu said that material prices are unlikely to surge higher in the near-term due to the pace of economic recovery softening. 

“Even if materials prices are unlikely to surge over the short term, contractors still face risks,” said Basu. “Anecdotal information suggests that competitive bidding pressures have increased significantly in recent months, which has the effect of diminishing profit margins.”

Associated Builders and Contractors also reported that its Construction Backlog Indicator declined to 7.8 months in July, a decrease of 0.3 months from the June reading. The report is based on an ABC member survey conducted from July 20 to Aug. 5. The indicator is also a full month lower than in July 2019.

“Many contractors are quickly working through existing backlog,” said ABC Chief Economist Anirban Basu. “Because the virus remains deeply problematic and many communities are rolling back reopening plans, the partial economic rebound observed in May and June is set to flatten.”

This translates into contractors burning through their backlog for the remainder of 2020 and finding it more difficult to secure new jobs in 2021. 

“With project financing becoming increasingly challenging and with state and local governments in rough fiscal shape, the nonresidential construction environment is not shaping up to be a positive one, absent a meaningful infrastructure package,” Basu explained.

Based in Washington, D.C., Associated Builders and Contractors representing more than 21,000 members in the construction industry.