ABC Reports Construction Input Prices Up 23.1% Year-Over-Year

A recent analysis of the U.S. Bureau of Labor Statistics' Producer Price Index from Associated Builders and Contractors (ABC) revealed that construction input prices rose by 0.6% in July. The analysis also revealed that these input prices increased to levels 23.1% higher than a year ago.

Commodity prices have continued to soar under unrelenting demand and short supply. According to ABC, energy and steel have made significant contributions to the rise in prices from last year, including:

• Natural gas – up 146.7%
• Crude petroleum – up 102.9%
• Unprocessed energy materials – 93.8%
• Steel mill products – up 108.6%

"While it is quite likely that there will be less inflation a year from now, a rebounding economy, ongoing supply chain disruptions and limited productive capacity have conspired to generate rapid price increases," said ABC Chief Economist Anirban Basu. "Many economists insist that the current situation is merely temporary; still, today's input price increases can meaningfully affect contractor fortunes by trimming margins and delaying the onset of projects.

"The good and bad news is that the economy is flush with liquidity," said Basu. "Injections of money supply by the Federal Reserve, which has yet to indicate when it will begin to moderate its quantitative easing program, have helped create large pools of investable money. A significant fraction of that money is being invested in real estate, which often translates into construction projects.

"One can only conclude that the economy will continue to run hot into 2022 despite the malign impacts of the delta variant, producing both hefty advances in gross domestic product and unusually elevated inflation," said Basu. "The fact that steel prices are rising is not only an indication of the recovery transpiring in goods-producing industries like construction and manufacturing, but also of the difficulty global suppliers are having keeping up with demand."