Dive Brief:
- Construction material prices remained unchanged between June and July but are 2.3% below the July 2015 level, according to an Associated Builders and Contractors analysis of Bureau of Labor Statistics data released Friday.
- July's price stabilization came after four consecutive months of increases in construction industry inputs in the Producer Price Index.
- Only one of 11 input prices declined between June and July: crude petroleum. The remaining 10 material prices increased or stayed the same last month.
Dive Insight:
ABC Chief Economist Anirban Basu said the stability of material prices in July coincides with the group's recent predictions after "a period of market volatility." He said the global economy's disappointing growth hasn't resulted in significantly higher input prices, and supply is not yet outpacing demand for materials.
"With construction labor costs rising more rapidly in much of the country, including in quickly growing communities in the southeast and Pacific northwest, the stability in materials prices takes on greater importance from a profit margin perspective," Basu said in a release.
He added that with the recent slowdown in construction spending, some companies had been struggling to secure strong profit margins with the rise in material costs. Therefore, July's price stabilization comes as good news for construction firms. Earlier this month, The Commerce Department reported construction spending fell for the third consecutive month. Despite the downward trend, experts have predicted that construction activity will pick up again in the coming months.
Basu also said that construction firms shouldn't fear a bump in prices in the near future, as he said a "sharp increase" in material prices "is unlikely as the forces that have resulted in relative input price stability recently remain in place," including the stable U.S. dollar compared to other nation's currencies.
