Construction input prices increased 4.6% in May compared to the previous month, according to Associated Builders and Contractors’ analysis of U.S. Bureau of Labor Statistics’ Producer Price Index data.
Construction input prices are 24.3% higher than a year ago, while nonresidential construction input prices increased 23.9% over that span.
Similar to last month, all three energy subcategories registered significant year-over-year price increases. Crude petroleum has risen 187%, while the prices of unprocessed energy materials and natural gas have increased 100% and 90%, respectively.
The price of softwood lumber has expanded 154% over the past year. Over the past month, softwood lumber climbed 20.6%.
“The specter of elevated construction input prices will not end anytime soon,” said ABC Chief Economic Anirban Basu. “While global supply chains should become more orderly over time as the pandemic fades into memory, global demand for inputs will be overwhelming as the global economy comes back to life.”
Basu noted that contractors expect sales to rise over the next six months, as indicated by ABC’s Construction Confidence Index. “This means that project owners who delayed the onset of construction for a few months in order to secure lower bids may come to regret that decision.”
“Still, there are some things that have changed during the pandemic and will not shift back,” Basu added. “For instance, money supply around the world has expanded significantly. Governments have been running large deficits."
Basu noted this means that some of the inflationary pressure that contractors and others are experiencing may not be temporary, and that inflation and interest rates may not be as low during the decade ahead as they were during the decade leading up to the pandemic.