October Construction Material Prices Decline


According to an analysis of the U.S. Bureau of Labor Statistics’ Producer Price Index data, the Associated Builders and Contractors found that construction input prices declined 1.2% on a monthly basis.

Nonresidential construction input prices reportedly fell 1.1% for the month. Additionally, construction input prices are 1.1% lower than a year ago, while nonresidential input prices are 0.7% lower.

“The October construction materials prices report should be cheered by most contractors,” said ABC Chief Economist Anirban Basu. “Yesterday’s Consumer Price Index data and today’s Producer Price Index data indicate that inflation is declining.

“Not only does that translate into less rapid increases in the price of many key construction inputs, but it also signifies that the Federal Reserve is poised to begin reducing interest rates at some point next year. That will support an improving project financing environment, increasing demand for construction services in the process.

After a sharp spike in energy prices the month prior, prices fell in two of the three subcategories last month.

Crude petroleum input prices were down 2.9%, while unprocessed energy materials were down 0.3%. However, natural gas prices rose 10.9% in October.

Also notably, iron and steel prices fell 2.3%. Softwood lumber fell 3.2% and concrete products increased by 0.7%.

“That does not mean that all risks have disappeared,” said Basu. “Among the reasons for inflation’s retreat is a slowing economy.

“While financial markets have been laser-focused on good news on the inflation front in recent days, less attention has been invested in the downside risks to the economy, including growing consumer indebtedness, tighter credit conditions, geopolitics and the impact of the federal government’s insatiable appetite to take on more debt.”

Previous Energy Price High

Last month, the ABC’s analysis found that while material prices were still slightly increasing, the pressure was on as energy costs led higher prices and were expected to persist. The report found that construction input prices and nonresidential input prices both rose 0.2% in September compared to the previous month.

On a year-over-year basis, overall construction input prices are 0.3% higher, while nonresidential construction input prices are 0.6% higher. 

The ABC notes that prices increased in all three energy subcategories in September, including: crude petroleum prices were up 10.1%; unprocessed energy materials prices rose 7.5%; and natural gas prices were up slightly by 0.1%.

October Backlog, Confidence

Last week, the ABC also released its Construction Backlog Indicator for October, which is reportedly at the lowest level since the first quarter of 2022. Based on the member survey conducted from Oct. 19 to Nov. 2, the decline to 8.4 months is also down 0.4 months from this time last year.

Declines were reportedly concentrated among the smallest contractors, those with less than $30 million in annual revenues. All three other revenue categories, however, experienced an increase in backlog in October.

The backlog revealed an increase in numbers over several sectors, including:

  • the Heavy Industrial industry, from 7.4 to 10.2;
  • the Middle States region, from 6.3 to 7.1;
  • the $50-$100 million company size, from 10.7 to 12.5; and
  • the greater than $100 million company size, from 10.6 to 11.8.

The backlog also fell in a variety of sectors, including:

  • the Commercial & Institutional industry, from 9.3 to 8.6;
  • the Infrastructure industry, from 8.6 to 6.9;
  • the Northeast region, from 9.4 to 8.2;
  • the South region, from 10.4 to 10.1; 
  • the West region, from 9.1 to 8.1;
  • the less than $30 million company size, from 8.4 to 7.2; and
  • the $30-$50 million company size, from 11.4 to 11.0.

ABC’s Construction Confidence Index readings for sales, staffing levels and profit margins fell in October. All three readings remain, however, above the threshold of 50, indicating expectations for growth over the next six months.


Tagged categories: Associated Builders and Contractors; Associated Builders and Contractors Inc. (ABC); Building materials; Business conditions; Economy; Good Technical Practice; Market; Market data; Market forecasts; Market trends; NA; North America; Program/Project Management

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