Construction Materials Prices Continue to Increase
Along with Skilled Workforce Shortage, Puts Pressure on Profit Margins
For the fourth consecutive month, construction input prices rose as June saw a 1.1 percent bump on a monthly basis according to the Associated Builders and Contractors analysis of the Bureau of Labor Statistics Producer Price Index. The four months of increases were preceded by eight months of declines.
"Commodity prices stabilized in March and in many cases, including natural gas and oil, have been edging higher," says ABC Chief Economist Anirban Basu. "Accordingly, construction materials prices are now on the rise, which all things being equal translates into smaller profit margins. Alternatively, rising costs of construction may be passed along to owners of projects in certain instances.
"The inflationary impacts of rising materials prices are coinciding with a deepening skilled construction workforce shortage and a falling industry unemployment rate," Basu continues. "The possibility that construction will become meaningfully more expensive on a per unit basis over the next year may induce more developers to move their projects forward in an effort to minimize the impact of rising prices. Indeed, the Architecture Billings Index has been positive in recent months, signaling an active commercial construction market.
Year over year however, construction materials prices are down 2.5 percent. Most segments experienced only small gains or losses in June except for crude petroleum, up 17 percent over last month, and unprocessed energy materials with an 8.3 percent gain.