Construction input prices rise again as energy costs soar

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Dive Brief:

• Construction input prices increased 0.2% in September mainly due to rising energy costs, according to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics Producer Price Index data released Wednesday. 
• Overall construction input prices are 0.3% higher than a year ago, while nonresidential construction input prices are 0.6% higher, according to a release announcing the numbers. This follows a 1.5% materials price increase in August, the first in six months.
• “Today’s PPI report indicates that while inflationary pressures persist economywide, materials price increases are no longer at the heart of this bout of excess inflation,” said ABC Chief Economist Anirban Basu. “Today, inflation is driven less by supply chain issues and more by structural labor market dynamics and geopolitics.”

Dive Insight:

The rise in prices was mainly due to a bump in energy costs. In September, prices increased in all three energy subcategories. While natural gas saw a jump of only 0.1%, crude petroleum and unprocessed energy materials rose 10.1% and 7.5% respectively. 

Basu emphasized armed clashes globally present a wild card for how fuel costs will fare going forward. “Renewed conflict in parts of the world that produce a considerable amount of global energy could put more pressure on contractors during the months ahead, but such things are difficult to predict,” Basu said.

The gains mirror August’s price escalation, which were also the result of energy jumps. A separate analysis by Associated General Contractors of America last month found that the diesel producer price index rose 34.6% in August, the largest one-month growth since 1990.

Despite those escalations, most other commodities remained the same in September. The largest changes were in steel mill products, which dropped 3.7% month to month, along with iron and steel, which shrank 2.4% from August.

When looking at other causes for rising prices, Basu said supply chain issues may not be the problem they once were. Instead, Basu noted that the labor shortage continues to be a large thorn in the side of many contractors, which could only be countered by a downturn in activity that he doesn’t currently anticipate.

“At this time, that sharp downturn is not anticipated,” Basu said.