Prices for inputs to construction industries expanded 0.8 percent in March, the largest monthly increase in more than two years, according to the April 14 producer price index release by the Bureau of Labor Statistics. Prices have now expanded for two consecutive months after declining during the prior six; however input prices are down 3.6 percent on a year-over-year basis. March marks the fourth consecutive month year-over-year input prices have declined, the longest such streak since 2009. Crude petroleum prices fell 4 percent in March and have fallen in eight of the previous nine months.
“Although overall construction materials prices rose for the month, prices for more categories of materials decreased than increased, including sharp monthly declines in the price for softwood lumber and iron/steel,” said Associated Builders and Contractors Chief Economist Anirban Basu. “On a year-over-year basis, deflationary pressures are even more apparent as crude petroleum prices are down 55 percent and natural gas is down 45 percent, despite an increase in gas prices in March.
“Though U.S. nonresidential and residential segments continue to expand, global construction volumes remain suppressed by widespread weakness in Asia, Europe and Latin America,” said Basu. “With the U.S. dollar likely to get stronger over the next few months as domestic interest rates begin to rise, there is little likelihood of significant increases in construction input prices over the next six to nine months. Overall producer prices managed to increase 0.5 percent on a monthly basis, the first increase since June 2014. This reading serves to increase the likelihood that the Federal Reserve will begin to increase short-term interest rates later this year.”
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