- According to an Associated Builders and Contractors (ABC) analysis of information provided by the U.S. Bureau of Labor Statistics (BLS), February's construction material prices continued January's climb with a month-over-month increase of 0.7%. From February 2017, material prices increased 5.2%. Natural gas (23.5%), softwood lumber (5.6%), unprocessed energy materials (5.4%) and steel mill products (2.3%) saw the biggest price hikes since January, while crude petroleum (-7.3%) had the biggest monthly decline.
- Nonresidential construction material prices rose 0.4% since January and 4.9% since February 2017. Year-over-year, no materials the BLS tracks dropped in price, but the materials that saw the largest gains were crude petroleum (16.6%), softwood lumber (15.6%), unprocessed energy materials (9.4%), iron and steel (7.1%), and steel mill products (4.8%).
- International economic growth, a healthy U.S. construction market and government policies that affect materials, according to ABC chief economist Anirban Basu, will keep pushing material prices upward, at least for the next several months. New tariffs and U.S. economic policy have affected the prices for steel, aluminum and softwood lumber, but Basu added that steel prices were already on the rise. When adding rising wages and a labor shortage into the mix, Basu said contractor confidence in realizing profit margin growth has likely been "moderated."
Though February's report largely mirrors the ABC's findings in January, the major change has been the new steel (25%) and aluminum (10%) tariffs announced earlier this month by the Trump administration. While the decision puts domestic manufacturers of these products in a good position, there has been industry outcry against the decision.
U.S. contractors and suppliers source materials from all over the world — either because of price considerations or because there is no domestic option. Being forced to pay more for materials could push construction costs to a point where some projects could be canceled or shelved indefinitely to monitor where prices land.
Groups like the Associated General Contractors of America have been quick to point out that steel and aluminum are major components of many infrastructure projects and the tariffs could undermine the president's planned $1.5 trillion infrastructure initiative.
Amid backlash from trade partners, the Trump administration granted temporary tariff exemptions to Canada and Mexico, and Australian officials announced that they too would receive a similar waiver. This could ease the upward pressure on steel and aluminum prices as Canada is the largest single-country provider of both materials.