Construction material prices bounce back in June

Dive Brief:

Construction material prices rose a slight 0.2% in June, continuing the modest growth that was stalled temporarily in May, according to an Associated Builders and Contractors analysis of Bureau of Labor Statistics data released Thursday. It marks the sixth monthly increase in the past seven months. Prices were up 2.6% year-over-year.
The ABC attributed the uptick to a near-9% increase in crude petroleum prices, a comeback since a May drop of 19.6%. Seven of the 11 key inputs rose in June, including unprocessed energy materials (3.6%); prepared asphalt, tar roofing and siding products (0.5%); fabricated structural metal products (0.4%); and concrete products (0.3%).
Prices for softwood lumber (-3%); nonferrous wire and cable (-0.8%); plumbing fixtures and fittings (-0.3%); and natural gas (-0.3%) fell in June.

Dive Insight:

The strong global economic activity predicted for 2017 has not yet come to pass, despite a strong showing from financial markets and U.S. emerging markets, said ABC Chief Economist Anirban Basu in a release. The small increase in prices is evidence of the resulting lower-than-expected demand. While the global economy is growing, Basu said, it won't take off unless there is a considerable increase in activity in the U.S., China or European economies.

The U.S. gross domestic product grew at a rate of 2.1% in Q4 2016 and 1.4% in Q1 2017, according to the U.S. Department of Commerce. That's not likely to change much under President Donald Trump's proposed budget. The Congressional Budget Office expects the country's economy to grow at a rate of 1.9% if the plan is adopted as-is, despite Trump's claims that it would boost the economy by 3%.

Meanwhile, the construction industry is still waiting on the anticipated bump from a $1 trillion infrastructure program that has yet to materialize. Knowing how the administration will likely prioritize spending on such work is separate from addressing the outcomes of those decisions in practice, especially given that the discussions are contentious and a variety of outcomes are still possible. An infrastructure bill is now not expected until 2018.

What has been presented by the Trump administration, however, is a 2018 budget that would cut major transportation initiatives like the Federal Transit Administration's Capital Investment program as well as the Transportation Investment Generating Economic Recovery (TIGER) grants.

Earlier this week, the U.S. House Appropriations Committee followed the Trump administration's lead with a 2018 spending bill that eliminates TIGER grants and cuts Department of Transportation funding by nearly 8%. That's concerning for an industry that was expecting more infrastructure spending under Trump.