ARLINGTON, VA. — Falling prices for diesel fuel, lumber and steel cooled inflation for materials and services used in construction in the U.S. in December, but relief may be short-lived, according to analysis of government data by the Associated General Contractors of America released recently.
“While producer price indexes for construction inputs fell in December, they still outpaced other inflation measures for the year,” said Ken Simonson, the association’s chief economist, in the release. “In addition, some prices have already turned higher in January. Contractors are right to rank materials costs as a major concern for 2023.”
The producer price index for inputs to construction rose 7.2 per cent in 2022 despite decreasing 1.8 per cent from November to December. The year-over-year rise outpaced the 6.5 per cent increase in the consumer price index, the economist noted.
The one-month decline was driven by falling prices for fuel, lumber and steel, while other input costs rose. The producer price index for diesel fuel fell 28.7 per cent in December, the index for lumber and plywood slumped 3.7 per cent, and the index for steel mill products slid 2.7 per cent.
In contrast, the index for ready-mix concrete rose 1.4 per cent for the month and 13.6 per cent for the year. The index for architectural coatings such as paint increased 0.5 per cent in December and 26.1 per cent year-over-year. The index for copper and brass mill shapes climbed 1.5 per cent for the month and the index for aluminum mill shapes increased 1.3 per cent.
Some price declines are likely to reverse soon, Simonson warned. Steel producers have sharply raised prices in recent weeks for hot-rolled coil, the raw material for some construction steel, he noted. Major producers of insulation and tile have announced price increases for February.
In addition, recent spikes in futures prices on commodities markets for copper and aluminum may signal higher costs for these products soon, he said.