What’s next for pricing of construction materials, equipment

By Jack Kopanski| August 11, 2023

Photo: Sundry Photography/ iStock / Getty Images Plus/Getty Images

According to Anirban Basu, chief economist at the Associated Builders & Contractors, many contractors continue to complain about lengthy lead times for equipment. Photo: Sundry Photography/ iStock / Getty Images Plus/Getty Images

Construction input prices were unchanged in July relative to the previous month, according to an Associated Builders & Contractors (ABC) analysis of the U.S. Bureau of Labor Statistics’ Producer Price Index.

Nonresidential construction input prices fell 0.1 percent for the month, according to ABC.

Overall construction input prices are 3.1 percent lower than a year ago, while nonresidential construction input prices are 2.7 percent lower compared to July 2022.

Still, prices increased in all three energy subcategories. Natural gas prices were up 11 percent in July, while crude petroleum and unprocessed energy materials prices increased 8.4 percent and 8 percent, respectively.

“Goods prices continue to stagnate in the context of improved supply chains and a sluggish global economy,” says Anirban Basu, ABC’s chief economist. “It has been the improvement of supply chains that best explains recent positive economic outcomes in the U.S. economy. As supply chains have normalized, unmet demand has been more readily satisfied. That has propelled transactional volume and economic growth. At the same time, the improved supply chain has helped push prices lower, contributing to the disinflation observable both in consumer price index data and the producer price index.”

Basu adds that construction materials prices should, for the most part, be reasonably stable in the coming months.

“One exception may be construction equipment prices,” he says. “The price of equipment expanded nearly 2 percent on a monthly basis in July and nearly 10 percent over the past year. Many contractors continue to complain about lengthy lead times for equipment as the nation continues to expand spending on infrastructure.”