Construction material prices higher in December

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 “For three consecutive months, construction materials prices have been surging,” announced Associated Builders and Contractors Chief Economist Anirban Basu. The latest numbers from the Labor Department come from December when materials prices rose another 0.9 percent for the month.

“Over the past three months, the monthly increases have been 0.6 percent, 0.5 percent, and 0.9 percent. These increases appear to be in conjunction with broader increases in import prices, which have also risen substantially over the past three months, largely due to rising energy prices,” said Basu.

The gains in materials prices were broad based, including in the softwood lumber, iron and steel, and nonferrous wire and cable categories. These increases are occurring despite the fact that construction levels remain suppressed in both residential and nonresidential categories. Likely explanations for the rise in materials prices include a shift of investors’ money from bond funds into the commodities market, and the rapid expansion of a number of large emerging countries where construction is vibrant.

“For contractors in the U.S., this cannot be viewed positively. Rising materials prices put even more downward pressure on already slender profit margins,” said Basu. “Moreover, the increase in project costs associated with rising materials prices makes it more likely that certain projects will remain on hold. However, given recent stability in the U.S. dollar, it may be that materials prices will not increase as forcefully as in the past months.” Read more.

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