US Construction Input Prices Decline, Sparking Interest in Future Rate Cuts
21/06/2024
US construction input prices saw their first decrease since December 2023, with a notable 0.9% drop in May, reports the Associated Builders and Contractors (ABC). This decrease follows earlier sharp increases, notably in energy categories like crude petroleum and unprocessed materials.
According to data from the US Bureau of Labor Statistics’ Producer Price Index, industry input prices decreased by 0.9% from April to May 2024. Specifically, input prices for the non-residential sector fell by 0.8% during the same period.
This decrease follows a period of significant price increases in the first four months of the year. Notably, prices for crude petroleum and unprocessed energy materials dropped by 8.7% and 6.6%, respectively, while natural gas prices saw a modest increase of 1.7%.
ABC’s chief economist noted the potential for future interest rate cuts, buoyed by recent declines in input prices and broader economic indicators. Despite a slight dip in backlog figures, contractor confidence remains high, with ongoing concerns over material cost escalations throughout 2024.
Looking back over the past year, construction inputs have risen substantially, with increases of 41% in overall construction, 41.6% in non-residential construction, and 42% in commercial construction since February 2020. While recent decreases offer relief, input prices still remain significantly higher compared to pre-pandemic levels, with commodity prices such as steel mill products and fabricated structural metal products showing the highest increases.
As the construction industry navigates these economic dynamics, stakeholders continue to monitor market trends closely, preparing for potential impacts on project costs and timelines.
