Rising Energy Costs Impact Construction Input Prices

Dive Brief:

• Construction input prices increased 0.4% in July largely due to price hikes in petroleum and natural gas, according to an Associated Builders and Contractors’ analysis of U.S. Bureau of Labor Statistics data released Tuesday.
• Overall and nonresidential construction costs have stabilized over the past year, posting increases of just 1.1% and 0.8%, respectively. However, these costs still sit near 40% higher than in February 2020, according to the report.
• “The lack of materials price escalation over the past 12 months is a welcome development for contractors, just 34% of whom expect their profit margins to expand over the next six months,” said Anirban Basu, ABC chief economist. “Ongoing input price moderation, along with the prospect of lower interest rates by the end of the third quarter, should bolster contractor sentiment in the coming months.”

Dive Insight:

Increases in energy prices drove most of the total rise in construction input costs over the past month, according to the report. 

For example, prices in all three energy subcategories increased in July. Natural gas prices jumped 13.3%, while unprocessed energy materials and crude petroleum prices surged 6.2% and 5.5%, respectively.

But most other construction materials remained relatively stable, said Macrina Wilkins, senior research analyst with the Associated General Contractors of America, in an email to Construction Dive. 

For example, concrete products posted no significant price change over the month, while brick and structural clay tile inched up just 0.1%, according to the U.S. Bureau of Labor Statistics. Construction machinery and equipment also ticked up 0.2%, according to the data.

Nevertheless, volatility remains from a year-over-year perspective. Steel prices dropped 14% over the past 12 months, while other commodities, such as copper wire and cable, increased about 13.9%, according to the report.