BuildingTeam Construction Forecast

Construction Materials Prices Fall 0.8% in August

Year-over-year Increase in Material Inflation only 1.5%
Construction materials prices declined 0.8% in August from July, cutting the increase over the last year to only 1.5%. More declines in the price index, although smaller, are expected in the next few months until homebuilders need to raise their materials purchases. The figures in the accompanying table are based on the Producer Price Index series published by the U.S. Bureau of Labor Statistics.

Construction Costs
Construction Costs

The large August cost declines were driven by a plunge in energy prices (which has been partially reversed in September) and another round of cuts in materials orders as a consequence of the withdrawal of some lenders from residential and commercial mortgage lending. There were no significant price increases in August. Aggregate prices rose 0.6% month to month; asphalt roofing prices climbed 1.9%; and aluminum rods and bars increased 0.9%. However, none of these appears to be part of a sustained rise in price.

More Risk from Accelerating Wage Rate Gains
Facility planners and contractors now have more cost risk from accelerating wage rate gains than from higher-than-anticipated materials cost. Reed Construction Data expects the period of weak materials pricing to terminate around yearend, when total construction spending is again expanding.

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