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ABC Economist Suggests Construction Industry Focus on 'Broader Trends' Due to 'Erratic' Input Prices

Construction input prices have yet to establish a trend over the past few months, despite a slight increase in May. Although prices rose 0.8% last month, Associated Builders and Contractors (ABC) Chief Economist Anirban Basu said U.S. construction firms should focus their attention to "broader trends" given the current economic climate.

According to ABC's latest report, eight of the 11 subcategories saw month-over-month (MoM) increases, particularly crude petroleum, natural gas and unprocessed energy materials—all of which increased by double digits. Several others, including plumbing fixtures and fittings, nonferrous wire and cable, and concrete products, increased by less than 1%. Steel mill products, prepared asphalt, tar roofing and siding products, as well as iron and steel decreased.

"The world and nation remain in disarray," Basu said in the June 11 report. "Global supply chains are fragmenting. Trade wars are reemerging. State and local government finances are fragile, and there is an imminent presidential election. These are unsettled times. Therefore, data readings are likely to be highly variable from moment to moment. That statistical volatility does not represent a solid foundation upon which to make business decisions."

April's decline in construction input prices was misleading, he added, as it led some "to believe that deflationary forces were at work in an environment characterized by massive job losses, project postponements, a reeling global economy and plunging energy prices."

Basu described future input prices as "erratic from month to month" and that the likelihood of sustained increases was minimal in the foreseeable future.

—Andrew Michaels, editorial associate

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Thursday, 09 July 2020