Construction Input Prices 'Virtually Unchanged' in October
The common proverb, "No news is good news," rang true for the construction industry last month after the U.S. Bureau of Labor Statistics' Producer Price Index found input prices were "virtually unchanged," according to Associated Builders and Contractors (ABC). Although construction input prices increased just over 1% in October year over year (YOY), there was no increase between September and October 2020.
ABC reported slight fluctuations in nonresidential construction inputs, which did not increase overall month over month but saw a 0.5% increase YOY. Crude petroleum was the only material to climb by a double-digit percentage at nearly 14%, followed by minimal increases in unprocessed energy materials; steel mill products; iron and steel; fabricated structural metal products; plumbing fixtures and fittings; and concrete products. Meanwhile, softwood lumber decreased by 8% in addition to declines in natural gas and prepared asphalt, tar roofing and siding products.
"This has everything to do with COVID-19," ABC Chief Economist Anirban Basu said in the report. "Economic lockdowns are becoming more pervasive in much of the advanced world as winter approaches. With infection rates and hospitalizations spiking in much of the northern hemisphere, including in both Europe and the United States, the economic recovery that began in the second quarter will likely be interrupted. That will translate into diminished demand for many global commodities, putting downward pressure on prices."
The industry is also facing issues with supply chains, specifically due to "depleted inventories," Basu noted. While there are currently no signs of increasing prices in the near-term, mid- to late-2021 could bring "rapid increases."
—Andrew Michaels, editorial associate