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Construction Input Prices Down as ABC Predicts Global Recession

To the delight of construction professionals, input prices dropped more than half of a percent in February, specifically 0.6% for nonresidential construction. Associated Builders and Contractors (ABC) Chief Economist Anirban Basu said although this news is generally welcomed with open arms, "there can be too much of a good thing," especially considering the current coronavirus pandemic and its disruption to the global supply chain.

"The recession in the United States is likely to be short and vicious, with certain industries like travel and hospitality hammered and financial markets in disarray," Basu said in a press release. "There is already some evidence that certain credit markets are seizing up, which is never good for construction."

According to ABC, natural gas and unprocessed energy materials rapidly declined month over month (MoM) by 15.8% and 13.6%, respectively—40.6% and 20.4% year over year (YOY)—with crude petroleum dropping 16.3% MoM. While iron and steel prices dropped both MoM and YOY, steel mill products increased slightly by 0.3% MoM but decreased 12.5% YOY.

The most substantial increase MoM and YOY was softwood lumber by 3.9% and 4.4%, respectively.

"With considerable stimulus likely on the way, low interest rates and the need to rebuild inventories at some point in the future, the broader economy and financial markets will one day move aggressively in a better direction," Basu noted. "Unfortunately, that positive adjustment could be a few months away, and in the meantime, a significant volume of construction projects are likely to be put on hold, placing additional downward pressure on construction input prices."

—Andrew Michaels, editorial associate

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Monday, 30 March 2020