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By Ethan Duran
The Daily Reporter

Fuel, lumber, steel and trucking costs were聽on the decline while materials like copper, aluminum and concrete rose聽last month in the latest Associated General Contractors of America analysis. Experts within the association said some聽construction input costs dropped in December in a look at the latest Bureau of Labor Statistic data.

The producer price index for material and service inputs to new nonresidential construction fell by 1.8 percent for the sixth time in seven months, and the PPI for goods sank 2.7 percent — a drop like this last seen in November 2008, association officials said. However, materials and services were up 7.2 percent year-over-year and slightly outpaced a 6.5 percent increase in the consumer price index, which is the crystal ball of inflation.

Construction input costs were 7.9 percent higher than they were a year ago and nonresidential construction input prices were 7.6 percent higher, an Associated Builders and Contractors analysis showed. ABC‘s top economist Anirban Basu said the recent short-term price drops had both good and bad effects on the construction economy.

鈥淭his Producer Price Index data represents another positive development on the inflation front,鈥� Basu said during a recent webinar. 鈥淗owever, this is both good and bad news. Recent consumer and producer price releases indicate that inflation is fading, though it remains well above the Federal Reserve’s 2 percent target. Should inflation continue to abate, the Federal Reserve may be able to stop increasing interest rates sooner than anticipated. Interest rate-sensitive segments like real estate and construction would be among the primary beneficiaries. Contractors are currently maintaining their longest backlog since 2019, according to ABC’s Construction Backlog Indicator.鈥�

Falling prices may also indicate a shaky economy in the U.S. and other parts of the world, Basu said.聽鈥淢oreover, there could be bad news on inflation in the months ahead. War continues in Eastern Europe and the commodity use-intensive Chinese economy is in the process of reopening. Though there is evidence of improving supply chain functioning and moderation in input prices, contractors should not be tempted into complacency,鈥� he added.

The PPI for new nonresidential building construction, the measure of the price contractors would bid to build a fixed set of buildings, was flat for the month and up 19.4 percent year-over-year, the AGC said.

New residential construction PPI inputs fell 1.2 percent for the month but increased 6.9 percent year-over-year, followed by one-month declines for four product groups:

• Diesel fuel was down nearly 30 percent, but up 20 percent year-over-year;
• lumber and plywood were down 3.7 percent for the month and down 20 percent year-over-year;
• steel mill products were down 2.7 percent and down 29 percent, respectively; and
• truck freight transportation was down 1.7 percent and 8.2 percent year-over-year.

Meanwhile, copper and brass mill shapes had a PPI increase of 1.5 percent in November, but prices were down 3.6 percent year-over-year, AGC’s analysis showed. Ready-mixed concrete was up 1.4 percent for the month and 13.6 percent year-over-year and aluminum mill shapes were up 1.3 percent for the month and 5.7 percent year-over-year.

AGC found some concrete steel producers posted price increases in December for hot-rolled coil, and commercial retail tile producers announced price increases up to 8 percent in February.

U.S. hotel construction saw a slight increase in the last few weeks but plans for future rooms fell 16 percent, according to STR data analytics. Places like New York City, which has the most rooms under way, and Nashville were showing signs of a slowdown.

Single-family housing starts fell 1.4 percent in December at a seasonally adjusted annual rate from November and 22 percent year-over-year, the Census Bureau reported. Multifamily starts fell nearly 20 percent, with more permits out for the month but less compared to other years, leading analysts to suggest construction will decline when current projects are done. There were 926,000 multifamily units underway in December across the U.S.

The Federal Reserve projected a flat course for economic activity from mid-November to Jan. 9, according to its latest Beige Book report. 鈥淗ousing markets continue to weaken, with sales and construction declining across Districts,鈥� the central bank said. 鈥淐ommercial real estate activity slowed slightly, on average, with more notable weakening in the office market. (Some) bankers said higher borrowing costs had begun to dampen commercial lending.鈥�

Meanwhile, union membership in the industry dipped by 0.5 percent or 5,000, from an annual average of 1,024,000 in 2021 to 1,019,000 in 2022, the Bureau of Labor Statistics reported. There were 8,671,000 people employed in the construction industry last year, which is a 6.3 percent increase from 2021, but unionization rates still declined between years. The total of workers represented by unions was 1,076,000 (or 12.4 percent) in 2022, compared to 1,112,000 (or 13.6 percent) in 2021.