Dive Brief:
- Construction material prices rose 1.0% in January following a slight bump in December, according to an Associated Builders and Contractors analysis of Bureau of Labor Statistics data released Tuesday.
- Material prices year-over-year rose 3.8%, marking the fastest year-over-year increase since the offset of 2012.
- As they did in December’s readings, energy prices again played a key role in overall price gains, with substantial increases seen in natural gas at 23.6% for the month and an 81.8% boost in its year-over-year tally. Unprocessed energy materials saw a more modest gain, rising 6.7%, while crude petroleum prices dipped 5.5% in January.
Dive Insight:
ABC Chief Economist Anirban Basu attributed last month's bump to evidence showing a gradual solidification in global demand for materials — particularly in China. While solid gains in the Chinese economy likely benefited the materials price index, Basu also pointed to indications that an anticipated uptick in business investment could speed up U.S. economic growth and influence prices in the months to come.
January’s price gains mirror analyst predictions for the year that projected the rising cost of doing business would be a top concern for the industry. Material and labor cost gains, coupled with an already tight inventory and skilled labor shortage, could make it difficult for firms to maintain their margins in 2017. Material price inflation alone could dampen contractors’ prospects for new projects.
