TWIA Commercial Property & Casualty
Construction input costs stabilize as contractors eye relief
Sep
Dive Brief:
- Construction input prices inched up marginally in August but have eased over the past year, according to an analysis by Associated Builders and Contractors, just as the Federal Reserve prepares to decide whether to cut interest rates next week.
- Overall construction costs ticked up 0.1% in August, according to ABC’s analysis of U.S. Bureau of Labor Statistics released Thursday. Over the past year though, inputs to construction decreased 0.7%, while nonresidential costs ticked down 0.9%.
- “Construction input prices are now down almost a full percentage point over the past year,” said Anirban Basu, ABC chief economist. “This is a welcome development for contractors.”
Dive Insight:
Ongoing economic uncertainty has led many contractors to expect profit margins to shrink over the next six months, according to ABC’s Construction Confidence Index.
After all, construction costs still sit close to 40% higher than in February 2020 before the onset of the global pandemic.
But lower material prices compared to last year, combined with the widely anticipated reduction in interest rates at the Federal Reserve’s next meeting, are expected to provide some reprieve for contractors in the coming months, said Basu.
“Moderating materials price escalation, along with easing labor constraints and the near certainty that the Federal Reserve will begin lowering interest rates at its next meeting, should provide some relief to contractors over the next several months,” Basu said.
Prices in all three energy subcategories decreased significantly in August, according to the U.S. Census Bureau data. Natural gas prices dropped by 29.8% in August, while unprocessed energy materials and crude petroleum prices declined by 7.5% and 4.2%, respectively.
That’s a positive trend for contractors, as energy cost growth last month had caused overall construction inputs to jump despite a stabilization across most other construction materials.
For example, prices for construction materials such as brick, structural clay tile, construction machinery and switchgear posted no change from the previous month, according to the data. Other materials, including concrete, gypsum products and hot rolled steel bars posted slight price drops over the past 30 days, said Macrina Wilkins, senior research analyst with the Associated General Contractors of America.
“Over the past year, diesel fuel, concrete pipe, steel mill products, copper and fabricated structural metal prices showed the most significant changes,” said Wilkins in an email to Construction Dive. “[That reflects] some volatility within an otherwise relatively stable market.”
Stay Ahead in Construction: Essential Insights and Protection for Your Projects
The construction industry is the backbone of progress, constantly evolving and presenting new opportunities and challenges. As an investor, realtor, or lender in this vibrant sector, staying informed with the latest construction news is key to making smart decisions. Our blog, sourced from one of the top construction industry sites, is your gateway to staying ahead of the curve.
But what about protecting your investments and projects? Alongside these insights, we present our comprehensive Contractor Insurance Suite, designed to shield your construction projects from the unforeseen. From liability to property damage, our insurance solutions provide the security you need in an industry known for its unpredictability.
Whether you're breaking ground on a new project or managing ongoing developments, our insurance suite ensures that your financial interests are protected immediately. Discover how our tailored insurance products can be the cornerstone of your construction project's success.
Explore Contractor Insurance Solutions for Construction Success
This post was originally published on this site
