Construction Input Prices Down for Second Consecutive Month in April, Associated Builders and Contractors Reports

According to the Associated Builders and Contractors’ (ABC) analysis of the US Bureau of Labor Statistics’ (BLS) Producer Price Index (PPI) data released Thursday (5-11-23), construction input prices increased 0.2% month-over-month in April. Nonresidential construction input prices rose 0.4% for the month.

ABC says overall construction input prices are down 1.1% year-over-year, while nonresidential construction has declined 0.8%. Prices increased in two of the three energy subcategories in April. Crude petroleum increased 14.2%, while unprocessed energy materials were up 5.2%. Natural gas prices fell 20.1%.

Adding additional background and his analysis, ABC’s Chief Economist Anirban Basu said:

“Construction input prices were relatively tame in April and were down on an annual basis for the second straight month. This PPI release provides some good news for an industry that has dealt with a nearly 40% increase in construction costs since the start of the COVID-19 pandemic. But inflation remains a pressing issue for the industry and the broader economy. The Consumer Price Index, which is more important for monetary policy and broader economic sentiment, was up 4.9% year over year in April, well above the Federal Reserve’s 2% inflation target.

Despite the annual decline in input costs, contractors’ profit margins are still under pressure. Due to higher borrowing and labor costs and the substantial increase in materials prices over much of 2021 and 2022, the proportion of contractors that expect their profit margins will increase over the next two quarters has slipped in recent months, according to ABC’s Construction Confidence Index.”