Construction Material Prices Continue to Fall in February

Construction input prices fell for the eighth consecutive month during February 2016 according to an analysis of the Bureau of Labor Statistics Producer Price Index released by Associated Builders and Contractors (ABC).

Construction input prices fell 0.6 percent on a monthly basis in February and 3.7 percent on a yearly basis. Inputs to nonresidential construction fell even further, declining 0.7 percent from January 2016 and 3.8 percent from February 2015. Prices for eight of the 11 key inputs declined on a monthly basis in February, while nine of the 11 key inputs experienced year-over-year price declines, according to the report.

“Weak global growth and the prospects of a strengthening U.S. dollar have helped suppress commodity and therefore material prices,” says ABC chief economist Anirban Basu. “The February PPI data do not reflect the more recent increases in various commodity prices, ranging in oil to iron ore, and it is quite likely that in construction materials prices will rebound some in March. However, a significant run up in prices is unlikely in the coming months as little has changed to support stronger commodity prices.

“Financial markets remain shaky,” adds Basu. “Brazil and Russia remain in recession and Chinese growth continues at its worst pace in at least two decades. Europe continues to recover only slowly, and the United States continues to expand at a lackluster pace. The Japanese central bank recently introduced negative interest rates matching what European monetary policy makers have had in place for quite some time. By contrast, the presumption is that the Federal Reserve will be raising rates later this year.”