Dive Brief:
- Construction material prices rose 0.4% in December after undergoing a sharp drop in November, according to an Associated Builders and Contractors analysis of Bureau of Labor Statistics data released Friday.
- Material prices year-over-year rose 2.1%, signaling the biggest 12-month increase in 30 months.
- Energy prices played a key role in overall price gains, with the most substantial increases seen in crude petroleum prices (18.9%) and natural gas prices (23.1%). Unprocessed energy materials saw a more modest gain, rising 14.6% in December, while concrete products and materials including prepared asphalt saw small declines.
Dive Insight:
The rise in prices follows a prediction experts cited for 2017 that maintained the rising cost of doing business would be one of the most common concerns for the industry. As material and labor costs climb, the forecast holds that firms will likely grapple with maintaining their margins in the coming year.
Material price inflation is cause for concern for some contractors, as it could put a hold on new projects moving forward. And while construction costs continue to soar above inflation, experts say the trend could come unhinged in the future as owners tire of taking on developers' and builders' prices. The rising cost of materials, in part, contributed to the ABC's December report that forecast a deceleration in nonresidential construction growth for 2017.
While elevated input prices dampen the industry's present outlook, the skilled-labor shortage has driven employers to hike average pay wages that top the national average. Insiders say that raising labor costs, including recruiting and wage costs for current employees, will drive another blow to contractors' bottom lines.
