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Decrease in April Construction Input Prices Spells Good News for Industry

A bit of good news made its way to the construction sector last week when Associated Builders and Contractors (ABC) reported a dip in construction input prices in April. Overall prices declined nearly 4.5% last month, the majority of the decline seen in nonresidential construction input prices at 4.2%. ABC Chief Economist Anirban Basu said inflation is probable when the economy recovers; however, the construction industry shouldn't balk at these lower prices.

"For project owners, this may be an important reason to move forward with planned construction projects," Basu said in a press release. "There are cost savings to be reaped during this period as materials prices, including energy prices, falter. Moreover, initiating construction now may position projects to come online as the broader economy begins to recover in earnest."

According to ABC, nine out of the 11 subcategories saw declining prices in April, particularly crude petroleum (48.9%), unprocessed energy materials (27.5%) and natural gas (20.4%), all of which significantly declined over April 2019. Softwood lumber prices also declined month-over-month (MoM) at 11.2%, while there were also minimal declines in iron and steel; steel mill products; prepared asphalt, tar roofing and siding products; nonferrous wire and cable; and fabricated structural metal products.

In addition to project owners, Basu states, the federal government and other levels of government might find it worthwhile to take advantage of the low prices for infrastructure investments.

"Unfortunately, state and local government budgets are being hammered by a paucity of income, sales, hotel and other tax collections," he said. "All things being equal, that leaves less money to finance infrastructure projects and makes it less likely that the public sector will take full advantage of presently low borrowing costs. All of this suggests that the federal government should fashion a significant infrastructure-oriented stimulus package in the very near term."

—Andrew Michaels, editorial associate

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Thursday, 09 July 2020