Construction input prices jump again, continue 2024’s upward climb

A new ABC report points to yet another sign that inflation is accelerating and that interest rates are set to stay higher for longer.

Dive Brief:

• Construction input prices increased 0.5% in April due to inflation and energy costs, according to a new Associated Builders and Contractors’ analysis of U.S. Bureau of Labor Statistics Producer Price Index data released Tuesday.
• The jump in April marks an increase in input prices for every month of 2024 so far. Both overall and nonresidential construction costs remain 2.3% and 2.2% higher, respectively, than a year ago, according to the report.
• “Construction input prices jumped half a percentage point higher in April and have increased 3.5% over the first four months of the year,” said Anirban Basu, ABC chief economist. “This is yet another sign that inflation is accelerating and suggests that interest rates are set to stay higher for longer.”

Dive Insight:

Ken Simonson, chief economist at the Associated General Contractors of America, echoed Basu’s concerns about rising input costs and its impact on contractors’ bids and project expenses.

“Prices for construction inputs have risen faster than contractors’ bids every month so far in 2024,” said Simonson. “In addition, persistently long lead times for electrical equipment are adding to the cost of many building and infrastructure projects.”

While iron, steel, asphalt and gypsum product prices fell in April, oil and copper prices surged, driving the overall monthly increase, said Basu.

For example, prices increased in two of the three energy subcategories in April. Crude petroleum prices jumped 10.6%, while unprocessed energy materials prices increased 8.2%. Natural gas costs decreased slightly by 0.9% in April.

Basu added rising input costs will put pressure on profits at a time when nearly one in four contractors expect their margins to contract over the next two quarters.

‍

‍