Dive Brief:
- Construction input prices ticked down 0.3% in June due to fewer projects getting off the ground across various sectors, according to an Associated Builders and Contractors’ analysis of U.S. Bureau of Labor Statistics data released Friday.
- Both overall and nonresidential construction costs remain 1.1% and 0.7% higher, respectively, than a year ago, according to the report.
- “Construction materials prices dipped in June, perhaps a reflection of declining project starts in a number of construction segments and an associated dip in demand,” said Anirban Basu, ABC chief economist. “For instance, input prices fell in the multifamily segment, where many contractors indicate substantial softening of demand for their services. The same was true of input prices in commercial construction segments.”
Dive Insight:
Amid concerns about the Federal Reserve’s approach to interest rates, it was reassuring to note the consumer price index, a key inflation measure, remained flat for the month, said Macrina Wilkins, senior research analyst with the Associated General Contractors of America.
This aligns with the broader trend of decelerating inflation, she added. That’s a positive sign for rate cuts before the end of the year.
But Basu said while ABC members continue to report both stable backlog and confidence, reasons for concern still linger.
The Federal Reserve is still looking for data indicating the 2% inflation target will soon be reestablished, he said. That means any data that indicates the opposite would likely forestall the much-anticipated interest rate cuts.
Further delays to interest rate cuts would be damaging to construction industry prospects, said Basu.
Prices for insulation materials ticked up 2.1% in June and remain up 6.7% since last year. Meanwhile, switchgear, switchboard and industrial controls equipment prices moved up 1.7% in June, according to the U.S. Bureau of Labor Statistics.
Costs increased in two of the three energy subcategories in June, led by a 36.3% gain in natural gas prices, according to the data. The aggregate price of unprocessed energy materials increased 4.7%, while crude petroleum prices dropped 0.2% in June, according to the report.
