Rising energy costs are driving up construction costs
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Diving certificate:
- Prices for building materials rose by 0.4% in July largely due to increases in oil and natural gas prices, according to an analysis of U.S. Bureau of Labor Statistics data released Tuesday by Associated Builders and Contractors.
- Total and non-residential construction costs have stabilized over the past year, recording increases of just 1.1% and 0.8%, respectively. However, according to the report, these costs are still almost 40% higher than in February 2020.
- “The lack of an increase in material prices over the past 12 months is a positive development for contractors. Only 34% of them expect an increase in their profit margins in the next six months,” said Anirban Basu, chief economist at ABC. “The continued weakening of input prices and the prospect of lower interest rates by the end of the third quarter should boost contractors’ sentiment in the coming months.”
Diving insight:
According to the report, energy price increases last month were primarily responsible for the increase in construction costs.
For example, prices rose in all three energy subcategories in July. Natural gas prices rose 13.3 percent, while prices for unprocessed energy materials and crude oil rose 6.2 percent and 5.5 percent, respectively.
But most other building materials remained relatively stable, Macrina Wilkins, senior research analyst at Associated General Contractors of America, said in an email to Construction Dive.
According to the US Bureau of Labor Statistics, there were no significant price changes for concrete products during the month, while bricks and building bricks only increased in price by 0.1 percent. According to the data, construction machinery and equipment also increased in price by 0.2 percent.
Still, year-on-year volatility remains. Steel prices have fallen 14 percent over the past 12 months, while other commodities such as copper wire and cable have risen about 13.9 percent, the report said.
