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Another Rise in Construction Input Prices

Construction input prices rose once again in August by more than half of a percent, according to Associated Builders and Contractors, where Chief Economist Anirban Basu said inflation is "a bit hotter than anticipated."

Based on the latest results from the U.S. Bureau of Labor Statistics' Producer Price Index, construction input prices and inputs to nonresidential construction both climbed last month by 0.6% and 0.3%, respectively. Natural gas took the lead with the highest increase of 22.8% followed by softwood lumber at 16%. Unprocessed energy materials and crude petroleum also rose by double-digit percentages, while prepared asphalt, tar roofing and siding products; steel mill products; iron and steel; fabricated structural metal products; and concrete products declined.

"A number of factors have triggered a pickup in inflation," Basu said in the report. "One is a weakening U.S. dollar, resulting from the lingering pandemic, as well as Federal Reserve policy and pronouncements. The Federal Reserve's injections of liquidity into financial systems are also consistent with stepped-up inflation expectations. The federal government will run an estimated $3.3 trillion budget deficit during the current fiscal year, which would also tend toward more inflationary pressures and eventual higher interest rates. Finally, the economic recovery to date has been robust, with the U.S. economy adding millions of jobs and recently driving unemployment well below 10%, meaningfully ahead of schedule based on consensus forecasts."

Despite the month-over-month increase, inputs to construction and nonresidential construction were down 0.9% and 1.2% over last year.

—Andrew Michaels, editorial associate

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Friday, 23 October 2020