Despite the monthly decline, construction input prices are still 20.8% higher relative to a year ago. Nonresidential construction input prices expanded 21.6% during that period. The price of natural gas has experienced the largest year-over-year increase, rising 132.2%, followed by the aggregate price of steel mill products, which increased 123.1%. Iron and steel prices have nearly doubled over the past year, increasing 95.2%. The prices of unprocessed energy materials and crude petroleum were also up, rising 79.2% and 74.8%, respectively.
“Though the headline number characterizing the direction of construction input prices appears favorable, many materials prices rose last month,” said Basu. “The overall decline in materials prices, which was small, was driven by two categories in which prices declined significantly: softwood lumber (-27%) and crude petroleum (-10%). But those were exceptions. Among the categories registering monthly price increases of 3% or more were prepared asphalt, steel mill products, natural gas and fabricated structural metal products.
“Some of the recent setbacks in global supply chain recovery relate to the dislocating impacts of the delta variant, but there are other forces at work, including government policy and geopolitics,” said Basu. “As a growing number of nations around the world increase vaccination rates, the global economic recovery should continue. That will put even more upward pressure on input prices, all things remaining equal. Passage of a meaningful American infrastructure plan would further catalyze price increases.
“Hopefully, currently elevated prices will induce suppliers to increase output in the short term and capacity over the longer term,” said Basu. “While supply chain disruptions, input shortages and high prices, which many contractors mentioned as factors affecting their backlog—according to ABC’s Construction Backlog Indicator—are likely to persist into 2022, the laws of economics suggest that project owners and the contractors who work on their behalf will benefit from some price relief at some point next year.”