Falling input prices expected to lift construction industry

According to the U.S. Department of Labor, prices for inputs to construction industries declined 0.1 percent in July after increasing 0.2 percent in June, a move one economist said should benefit contractors.

“Key input prices fell or were flat in all but one category in July and it is important to note that further downward pressure on input costs is likely to be reflected in next month’s report, as well,” Associated Builders and Contractors Chief Economist Anirban Basu said. “The state of affairs today is unprecedented. Nonresidential construction spending has been recovering robustly in the U.S. in recent months — up more than 11 percent on a year-over-year basis. On top of that, the multifamily building boom continues in most major U.S. metropolitan areas."

Year-over-year prices were down 3 percent in July and have been down on an annual basis for each of the past eight months. Prices of inputs to nonresidential construction industries declined 0.3 percent on a monthly basis and are down 3.9 percent on a yearly basis.

In addition, Basu explained that the decline in prices could mean rising interest rates down the line.

“All things being equal, these circumstances should correspond with rising construction materials prices,” he said. “But as a reflection of how global the economy has become, America’s nonresidential construction recovery is taking place in the context of collapsing commodity prices."

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