According to analysis provided by the Associated Builders and Contractors (ABC) regarding the U.S. Bureau of Labor Statistics’ (BLS) December Producer Price Index, construction input prices rose 0.6% in December when compared to November. Nonresidential construction input prices also increased 0.6% for the month. Overall construction input prices are up 22.3% from a year ago, while nonresidential construction input prices have increased 23.2% over that period.
In remarks prepared for the release of the analysis, ABC’s Chief Economist Anirban Basu said, “The definition of transitory continues to expand along the dimension of time. A year ago, Federal Reserve officials and many others thought that elevated inflationary pressures would have abated by now. They have not. Instead, materials prices remain elevated and generally continue to march higher.
“Much attention has been devoted to global supply chain disruptions,” Basu added. “Thanks to the omicron variant, those disruptions will persist through the first quarter of 2022. That translates into additional upward pressure on construction materials prices, something that estimators must consider as they submit bids for future work. Among the other implications of materials price increases is the redesign of projects to substitute for expensive inputs, such as steel. Not only does this put pressure on architects and engineers to identify alternative designs and materials, but it also means that contractors may end up working with inputs with which they are less familiar.”
“ABC continues to forecast that, at some point later this year, materials prices will begin to normalize,” said Basu. “The expectation remains that global supply chain disruptions will steadily fade as 2023 approaches as will the demand shock associated with economic reopening. The Federal Reserve has pivoted to a regime emphasizing inflation containment, which will also help to suppress inflationary pressures at some point in 2022. For these and other reasons, confidence among ABC members has continued to inch upward, according to ABC’s Construction Confidence Index.”
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Monthly Construction Input Prices Increase in December, Says ABC