Construction input prices rose on a monthly basis in March for the first time in nine months, according to an analysis of the Bureau of Labor Statistics (BLS) Producer Price Index recently released by Associated Builders and Contractors (ABC). Input prices expanded 0.9% on a monthly basis in March but are still down 3.4% on a year-over-year basis.
Nonresidential construction input prices behaved similarly, expanding 1% for the month but down 3.5% from a year ago. The monthly price gain was largely driven by crude petroleum, which expanded 40.7% for the month, the largest increase since BLS began tracking the series in August 1991. Despite the large monthly gain, crude petroleum prices are still down 26% from March 2015.
“Despite the rather profound percentage gain in oil prices and the overall nonresidential construction material price increase, rapid material price inflation remains unlikely going forward,” says ABC Chief Economist Anirban Basu. “There are a number of reasons for this, but perhaps the most important is the ongoing sluggishness of the global economy.
“Though we just entered the second quarter, the International Monetary Fund has already downgraded its outlook for current year global growth twice,” he adds. “World output is only expected to expand 3.2% this year.”
Basu says that central banks in much of the world continue to take steps to fight off deflation and several oil-producing nations have either announced expected reductions in production and/or are actively seeking to enter agreements that freeze production.
“These occurrences have helped to stabilize a number of commodity prices, including oil and iron ore,” he says. “However, there are no guarantees that meaningful production-cut agreements will be reached and faithfully implemented by oil producers. While global oil production growth is likely to slow, demand will continue to be weak, implying an uncertain price trajectory.”
Seven key input prices rose in February on a monthly basis:
Crude petroleum prices expanded 40.7% from February 2016, but are down 26% from March 2015.
Unprocessed energy material prices were up 6.1% on a monthly basis, but fell 24.1% on a year ago basis.
Prices for steel mill products increased 0.4% on a monthly basis, but are down 15.8% on a yearly basis.
Nonferrous wire and cable prices expanded 2.2% on a monthly basis, but fell 5.9% on a yearly basis.
Iron and steel prices rose 1.6% month-over-month, but have declined 14.7% year-over-year.
Softwood lumber prices were up 2.8% for the month, but have fallen 1.6% from the same time last year.
Concrete product prices edged up 0.8% month-over-month and are up 3% year-over-year.
Four key input prices declined on a monthly basis:
Prices for prepared asphalt, tar, roofing, and siding products fell by 1.1% from February 2016 and are down 1.3% from March 2015.
Natural gas prices were down 22.2% for the month and are down 40.2% from the same period one year ago.
Fabricated structural metal prices products declined 0.1% month-over-month and are down 2.4% year-over-year.
Prices for plumbing fixtures and fittings fell 0.3% for the month but are up 0.1% from the same time last year.