Economy Watch: Construction Material Prices Still on the Rise

Demand for construction materials remains high in the U.S., with positive wealth expectations creating confidence in real estate developers, according to a recent Associated Builders and Contractors report.
Source: Associated Builders and Contractors, Construction Economic Update (2017)
Source: Associated Builders and Contractors, Construction Economic Update (2017)

The cost of construction materials rose 0.6 percent in August and 3.7 percent on a annual basis, according to an Associated Builders and Contractors analysis of Bureau of Labor Statistics data. Nonresidential construction materials prices behaved similarly, rising 0.6 percent for the month and 3.5 percent for the year.

Prices of only three of the 11 key construction material categories fell for the month. Steel mill products were down 1.5 percent, prepared asphalt, tar roofing and siding products were down 0.3 percent, and natural gas was down 1.8 percent. Crude petroleum prices exhibited the largest increase, rising 11 percent on a monthly basis and 15 percent on an annual basis.

Demand for materials in the United States remains high, given the momentum in a number of segments of the economy, said ABC Chief Economist Anirban Basu. The fact that asset prices have been rising, including in key global equity markets, has contributed to pushing materials prices higher, with positive wealth effects triggering greater confidence among real estate developers.

Worldwide, the improving global economic environment has helped stabilize demand and prices for various commodities, Basu added. As a result, there haven’t been the sharp declines in material prices that happened during much of 2014 and 2015.