Construction material prices continue to climb in September

Dive Brief:

Construction material prices rose 0.8% from August to September and are up nearly 4.5% year-over-year, which is three times the rate of inflation, according to an analysis by the Associated Builders and Contractors (ABC).
Nonferrous wire and cable saw a monthly increase of 3%, the largest monthly gain of all 11 construction material categories, and crude petroleum, with a rise of 13.9%, had the biggest increase year over year. Natural gas (down 4%), softwood lumber (down 0.9%) and unprocessed energy materials (down 0.8%) saw a decrease.
Robust construction activity has contributed to the rise in prices, according to ABC Chief Economist Anirban Basu, as has the post-hurricane recovery in the Southeast U.S. and Texas. Global economic growth is also expected to put continued pressure on material prices.

Dive Insight:

A stronger international economy is sure to be welcome news for companies like Caterpillar, which suffered along with a weaker global market over the course of the last few years.

Late last month, the construction equipment giant reported an 11% annual increase in its worldwide machine sales for the three-month period ending in August. Asia and Pacific retail sales were up 44% while sales in North America had risen 4%.

The demand for construction materials generated by recent Hurricanes Harvey, Irma, Maria and Nate, which affected the U.S. Gulf Coast, the Southeast and Puerto Rico, along wiht the ongoing wildfires in Northern California, should not ease up for the next few years, at least.

Because of such widespread damage and a limited construction labor pool to help address it, rebuilding efforts will be slow-going. Houston-area builders have already reported years-long backlogs of home repair and construction. Many contractors in the affected areas who would normally be crossing state lines to help in the rebuilding efforts will likely find plenty of work closer to home.

As much as 27% — or $55 billion worth — of Houston's commercial real estate market sustained some level of damage from Harvey-related flooding, according to CoStar Group data. CoreLogic projected that Irma-related damage the Southeast could reach $65 billion.