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Construction Input Prices Stop Their Upward Advance in May
Petroleum Sees Big Drop


An analysis by the Associated Builders and Contractors of data from the Bureau of Labor Statistics showed that in May, prices for the most common construction materials and fuel supplies, which have generally been on the rise since March 2016 according to the association, stayed level.

After five consecutive months of increasing construction input prices, May's numbers brought a welcome change by remaining unchanged from last month.

Six of the eleven categories were actually a little higher month-over-month but a big difference in the price of crude petroleum, which fell 19.6 percent from April's levels, balanced that out. The largest increase was to softwood lumber at 2.2 percent.

"Since March 2016, construction input prices have generally been on the rise," says ABC chief economist Anirban Basu. "Many commodity prices established their cyclical nadir during last year's first quarter, with prices then surging higher for a time." He reports that motivating factors, including coordinated efforts by producers to curtail production and support higher prices, are no longer strong enough to cause them to rise more, and that the anticipated rate of growth for the U.S. economy has been scaled back slightly, which will also help keep prices in check.

"The role of technology and previous investments in productive capacities is just as important," Basu adds. "As shale and other producers become more efficient, the price for certain items will tend to fall, absent a countervailing increase in demand. This strongly implies that the trend of rising construction materials prices that was so apparent in 2016 will be less so during the current year."

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July 17, 2019, 8:34 pm PDT

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