BC Construction Group: Signs of Stabilization in Construction Cost Inputs

Signs of Stabilization In Construction Cost Inputs

By S.E. (Chip) Harp, Vice President, Education Division, BC Construction Group

We have faced unprecedented material price increases over the past months which has had a devastating effect on charter schools considering new construction or renovation.  Since February 2020 we have seen an exponential explosion in costs related to material inputs according to data provided by Associated Builders & Contractors.

  • Steel Mill Products up 124%
  • Iron and Steel up 97.4%
  • Structural Fabricated Metal Products up 55.8%
  • Nonferrous Wire and Cable up 50.7%
  • Prepared Asphalt, Tar Roofing, and Siding up 37.5%
  • Crude Oil up 152.6%
  • Natural Gas up 517.9%

Multiply this concern with the shortages in materials due to production and parts that have also created long lead times for ordering, plus the increase in borrowing costs, and you can see a real problem exists.

However, we may be seeing signs of at worst stabilization, and at best, correction. Again, from data provided by Associated Builders & Contractors, construction input prices DECREASED 1.8% in July compared to June, which also saw a reduction in prices from May.  In fact, input prices were down in 8 of 11 categories monthly, from June.  That’s back-to-back months of price stability and reduction.

“Today’s Producer Price Index data supplies additional evidence that inflation has peaked,” said ABC Chief Economist Anirban Basu. “A weakening global economy and ongoing supply chain adjustments have resulted in significant declines in the prices of a number of key commodities, ranging from oil to steel. While the risk of recession remains elevated, recent government reports on consumer and producer prices make it more likely that the Federal Reserve will be able to engineer a soft landing or that any recession to come could be quite mild. For contractors who have seen their profit margins diminished by elevated materials prices, a trend confirmed by ABC’s Construction Confidence Index, this is a welcome development.”

BCCG will continue to monitor these cost inputs and hopefully see prices continue to stabilize and pull back as the economy retracts and activity nationally slows. Our hope will be to see continued improvement to allow better conditions to proceed this fall with construction for 2023 completions.