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Steady Construction Input Prices Could Change in 2021

Contractors saw a 0.5% decline in construction input prices in November, a slight increase over the prior year. Although Associated Builders and Contractors (ABC) Chief Economist Anirban Basu described the price drop as "a natural growth of a strong economic rebound," there's still a possibility of a resurgence in prices next year.

Softwood lumber was behind the decline in input prices last month, falling more than 18%, followed by concrete products at 0.7%. Natural gas was in high demand, with costs rising nearly 50% between October and November, as well as a double-digit percentage increase in unprocessed energy materials. Prepared asphalt, tar roofing and siding products; steel mill products; iron and steel; nonferrous wire and cable; crude petroleum; fabricated structural metal products; and plumbing fixtures and fittings also saw minimal increases in pricing.

"While input price inflation is unlikely to represent a major challenge for contractors in the near-term, there is a possibility that input prices could surge at some point next year," Basu said in the report. "Once vaccinations become broadly available, the global economy is likely to gallop forward, creating significant growth in demand and driving prices higher. Those contractors who utilize softwood lumber are especially aware of such dynamics."

Basu used softwood lumber as an example, highlighting how single-family housing construction soared earlier this year and created a rush for softwood lumber. Prices increased but hit a plateau when supply caught up with demand.

—Andrew Michaels, editorial associate

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Saturday, 17 April 2021