Construction input prices dipped 0.1% in September compared to the previous month, according to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics’ Producer Price Index data released today. Nonresidential construction input prices also fell 0.1% for the month.
Construction input prices are up 16.3% from a year ago, while nonresidential construction input prices are 15.9% higher. Input prices were down in six of 11 subcategories on a monthly basis. Steel mill prices fell 6.7% and iron and steel prices dropped 5.4%. Natural gas prices rose 3.1%, while crude petroleum prices were down 3.4% in September. Overall producer prices expanded 0.4% in September, a larger increase than the consensus estimate of 0.2%.
“Investors and other stakeholders are eagerly awaiting any indications of meaningful declines in inflationary pressures,” said ABC Chief Economist Anirban Basu. “Elevated inflation and interest rate increases have not only undone momentum in America’s homebuilding industry but also threaten the entire global economy. There are already indications of growing financial stress, including at banking giant Credit Suisse. This is bad news for the heavily financed real estate and construction segments.
“While many American nonresidential contractors remain upbeat, according to ABC’s Construction Confidence Index, there are significant threats looming over the industry,” said Basu. “Next year stands to be a weak one for the U.S. economy as it continues to absorb the impacts of rapidly rising borrowing costs.
“Today’s PPI release strongly suggests that there is no impending end to the Federal Reserve’s rate-tightening, which means that negative factors threatening the broader economy and nonresidential construction are only getting stronger,” said Basu. “While nonresidential input prices fell slightly, inflation came in hotter than anticipated in the overall report. For contractors, the upshot is that they should be actively preparing their respective balance sheets for a downturn, even as many firms presently operate at capacity.”
Related Stories
Market Data | Aug 6, 2021
Construction industry adds 11,000 jobs in July
Nonresidential sector trails overall recovery.
Market Data | Aug 2, 2021
Nonresidential construction spending falls again in June
The fall was driven by a big drop in funding for highway and street construction and other public work.
Market Data | Jul 29, 2021
Outlook for construction spending improves with the upturn in the economy
The strongest design sector performers for the remainder of this year are expected to be health care facilities.
Market Data | Jul 29, 2021
Construction employment lags or matches pre-pandemic level in 101 metro areas despite housing boom
Eighty metro areas had lower construction employment in June 2021 than February 2020.
Market Data | Jul 28, 2021
Marriott has the largest construction pipeline of U.S. franchise companies in Q2‘21
472 new hotels with 59,034 rooms opened across the United States during the first half of 2021.
Market Data | Jul 27, 2021
New York leads the U.S. hotel construction pipeline at the close of Q2‘21
Many hotel owners, developers, and management groups have used the operational downtime, caused by COVID-19’s impact on operating performance, as an opportunity to upgrade and renovate their hotels and/or redefine their hotels with a brand conversion.
Market Data | Jul 26, 2021
U.S. construction pipeline continues along the road to recovery
During the first and second quarters of 2021, the U.S. opened 472 new hotels with 59,034 rooms.
Market Data | Jul 21, 2021
Architecture Billings Index robust growth continues
AIA’s Architecture Billings Index (ABI) score for June remained at an elevated level of 57.1.
Market Data | Jul 20, 2021
Multifamily proposal activity maintains sizzling pace in Q2
Condos hit record high as all multifamily properties benefit from recovery.
Market Data | Jul 19, 2021
Construction employment trails pre-pandemic level in 39 states
Supply chain challenges, rising materials prices undermine demand.
