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Price of construction materials declines in November

istock.com/Juanmonino

WASHINGTON—Construction materials prices fell 1.8% in November, according to Associated Builders and Contractors’ analysis of U.S. Bureau of Labor Statistics data. Despite the monthly decline, materials prices are still 5.3% higher than they were on a year-over-year basis.

Nonresidential construction input prices fell 1.7% for the month and are up 5.8% compared to the same time last year. Prices declined in five of 11 subcategories, with crude petroleum (down 29.5%) and unprocessed energy materials (down 11.5%) experiencing the largest decreases. Only natural gas recorded a substantial increase in price: up 15% from October.

“In general, contractors should find today’s report to be packed with positive data,” said ABC chief economist Anirban Basu. “Earlier in 2018, materials prices were racing skyward due to a combination of strong domestic demand, a synchronized global economic recovery, pervasive increases in asset prices, and tariffs imposed on steel, softwood lumber and other inputs.

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“Yet circumstances have changed materially,” said Basu. “The global economy has weakened in intervening months, which implies that demand for key productive inputs is no longer expanding rapidly. Rather than consistently rising, various asset prices have exhibited mores volatility. Given growing economic and financial uncertainty around the world, more investors have crowded into U.S. dollar-denominated assets as safe havens, pushing the value of the greenback higher, which also can suppress materials price increases. Moreover, the quantity of domestic production of certain key inputs appears to have risen in the context of higher prices earlier this year, including oil, softwood lumber and steel.

“The impact of expanding domestic production can be observed in the data,” said Basu. “For instance, steel mill product prices are up nearly 19.8% compared to a year ago but rose just 0.5% in November. Softwood lumber prices, which increased sharply earlier this year, are now down nearly 11% compared to last year and fell 3% in November. With the global economy expected to continue to weaken and the dollar expected to remain strong, contractors should expect only moderate increases in materials prices during the early months of 2019, though further declines in input prices are certainly possible.”

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