Cost for construction materials ‘decline steeply’ in December

Plunging prices for diesel fuel, lumber, and steel slowed inflation for materials and services used in construction in December in the US, but relief may be short-lived, according to an analysis by the Associated General Contractors of America of government data.

The analysis also noted that contractors listed material costs as one of their top concerns in a survey the association released this month.

“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.

Simonson added, “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 – the prices charged by goods producers and service providers such as distributors and transportation firms – have risen 7.2% in 2022, despite decreasing 1.8% from November to December. 

The one-month decline was further driven by falling prices for fuel, lumber, and steel. The producer price index for diesel fuel fell 28.7% in December, the index for lumber and plywood was down 3.7%, and the index for steel mill products slid 2.7%. In contrast, the index for ready-mix concrete increased 1.4% for the month and 13.6% for the year. 

More than 1,000 contractors answered the survey that the association and Sage jointly released earlier in January. Material costs and an economic slowdown or recession were the most frequently listed concerns, with both marked as among the biggest concerns for nearly three out of four firms.