Nov 14, 201704:12 PMBlog

Producer Prices up, Construction costs flat

Nov 14, 2017 - 04:12 PM

The Producer Price Index for final demand increased 0.4 percent in October, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices advanced 0.4 percent in September and 0.2 percent in August.

On an unadjusted basis, the final demand index increased 2.8 percent for the 12 months ended in October, the largest rise since an advance of 2.8 percent for the 12 months ended February 2012.

Despite that broader increase, construction input prices remained unchanged on a monthly basis in October. Overall construction inputs have seen 4.3 percent price gains year over year.

“The fact that materials prices have stabilized should be viewed as good news to the U.S. construction industry,” said Associated Builders and Contractors Chief Economist Anirban Basu.

“Most stakeholders agree that labor costs will continue to rise as America hurtles toward full employment,” Basu adds. “Significant increases in materials prices would further squeeze construction firms’ profits margins, or alternatively would make it less likely that planned construction projects would move forward.  

Within the overall picture, some building materials are sharply higher as the faster growing global economy, combined with China’s commitment to suppress excess steel manufacturing capacity, has helped to produce a nearly 14 percent increase in iron and steel prices over the past year.

“Where materials prices will go from here is pure guesswork,” adds Basu.

            

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