According to the U.S. Department of Labor’s producer price index, construction materials for U.S. markets rose 1.4 percent in March, the single biggest monthly increase in over a year. Since March of 2011, materials have risen over 3.8 percent.
The numbers are a bit misleading, as the majority of the materials market stayed relatively stable throughout last month, with a few exceptions. “Most construction materials prices behaved well in March,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. “The exception in this report was softwood lumber prices, which rose aggressively after a year of minimal increases. But a host of other input prices—including prepared asphalt, iron and steel, and fabricated structural metal products—barely budged.”
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“However, inputs into nonresidential construction are up 4 percent for the year, which is cause for concern,” Basu said. “Given lingering excess capacity among the contracting community and a general lack of pricing power, the increase in input prices during the past year likely has been enough to squeeze profit margins further for contractors. In addition, recent months have generally seen less vigorous increases in materials prices, which is a reflection of many factors, including a weak construction spending recovery in the United States.
Though the price increase was not as bad as some feared, Basu notes that the numbers are still harming the industry as a whole. "The increase in input prices during the past year likely has been enough to squeeze profit margins further for contractors."