Construction material prices hold steady in May – Construction Dive

Dive Brief:

  • Construction material prices held steady in May despite a sharp downturn in crude petroleum and unprocessed energy materials, ending five straight months of growth, according to an Associated Builders and Contractors analysis of Bureau of Labor Statistics data released Tuesday. Year-over-year, May material prices rose 3.4% from May 2016.
  • Natural gas increased a modest 1.9% in May and notched a 66% year-over-year price gain, after a sharp uptick in April saw material prices jump 25.1%. Unprocessed energy materials fell back 9.3% in May, while crude petroleum prices plummeted 19.6%.
  • Other materials that saw prices rise last month were softwood lumber (2.2%), plumbing fixtures and fittings (1.4%), steel mill products (1.1%), fabricated structural metal products (0.6%), and iron and steel (0.2%).

Dive Insight:

The halt in price growth comes as the U.S.’s economic outlook has been downgraded from 2.4% to 2.1% growth in 2017 by the Organization for Economic Cooperation and Development, according to ABC Chief Economist Anirban Basu. With an overall slowdown in economic growth, Basu said in a release, material prices are due for a deceleration that could last into the coming months.

Already, developers and construction firms face more unfavorable conditions for selling construction services than in recent years as they are dealing with high material prices and labor costs. Predictions also hold that the Federal Reserve will hike short-term interest rates at its meeting Wednesday to between 1% and 1.25%, according to MarketWatch. Combined with slow construction employment growth and rising material and labor costs, these rate increases could be a drag on developer’s project pipelines.

Though details on the Trump administration’s $1 trillion infrastructure package still remain unclear, recent details point to the possibility for an increased demand for materials and services. Earlier this month, the administration pointed to a desire to significantly reduce permitting time for projects with a proposal by President Donald Trump suggesting the formation of two councils (one to aid project managers in navigating bureaucratic processes and another to streamline the the federal review process) that could help give a much-needed jumpstart to the nation’s infrastructure projects. However, it remains to be seen when the administration will release its full plan, and whether increased demand for materials could be on the way. 

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