Dive Brief:
- Construction input prices fell 0.6% in December largely due to plunging oil prices, according to a new Associated Builders and Contractors’ analysis of U.S. Bureau of Labor Statistics Producer Price Index data released Friday.
- The decrease marks three consecutive months of price moderation, though volatility still remains in the cards, said Anirban Basu, ABC chief economist. Overall construction costs remain 1.2% higher than a year ago, while nonresidential construction input prices are 1.6% pricier.
- “Most input prices were tame in 2023’s final month,” said Basu in the release. “That serves as a fitting end to a year during which aggregate input prices increased just 1.2% and many individual commodity prices actually fell.”
Dive Insight:
Despite continued materials price moderation and other positive momentum around inflation, the construction materials cost outlook still carries inherent risks, said Basu.
“Piracy in the Red Sea and the resulting diversion of ships from the Suez Canal around the Cape of Good Hope has caused global freight rates to nearly double in the first two weeks of 2024, according to the Freightos Baltic Index,” said Basu. “All else equal, rising shipping costs will put upward pressure on certain inputs.”
Even before Friday’s report, Ken Simonson, chief economist at the Associated General Contractors of America, voiced similar concerns, emphasizing in December that despite consecutive months of cost decreases, material volatility was not “completely dead.”
For example, iron and steel ticked up 4.3% in December and remain 1.9% pricier than December 2022. Similarly, concrete products posted a 0.1% uptick in December and remain 7.3% more expensive than 12 months ago. Other materials, including construction sand, gravel, crushed stone, copper wire and cable also posted cost increases in December, according to the U.S. Bureau of Labor Statistics.