The construction industry continues to adjust to fluctuating material prices, driven by supply chain disruptions, global demand, and inflationary pressures. While the market has stabilized somewhat since the COVID-19 pandemic’s peak, prices have not returned to pre-pandemic norms. Recent data shows ongoing shifts in material costs that require close monitoring by contractors and developers alike.
According to the Bureau of Labor Statistics (BLS) Producer Price Index (PPI), construction material prices have slightly declined in recent months, with a 0.9% month-over-month drop in September. However, these declines should be considered in the context of overall price trends, particularly the significant increases seen since early 2020.
Per the BLS’s PPI for October 2024, various inputs to the construction industry have experienced mixed trends over the past year. Across all market sectors, the average price of construction materials fell 0.9% this month, and 1.9% over the past 12 months. However, prices remain 39.7% higher than pre-pandemic levels (since February 2020), though the trends slightly alternate based on the market sector.
- Multifamily construction costs have shown a decrease of 0.5% over the previous month, a decrease of 0.4% over the past 12 months, but an increase of 39.2% over the since February 2020.
- Healthcare construction costs have shown a decrease of 0.6% over the previous month, a decrease of 0.8% over the past 12 months, but an increase of 39.7% over the since February 2020.
- Industrial construction costs have shown a decrease of 0.7% over the previous month, a decrease of 1.0% over the past 12 months, but an increase of 36.1% over the since February 2020.
Among the biggest year-over-year materials include:
- Raw iron and steel prices are down 9.2% over the past 12 months, offering some relief after the extreme price spikes seen during the pandemic. However, they are still 40.5% higher than February 2020.
- Yet steel mill products have seen a sharp decline, dropping 12.3% year-over-year, though they are still up 45.8% since February 2020.
- On the other hand, copper wire and cable saw a 9.5% increase over the past 12 months and are now 41.9% more expensive than they were before the pandemic.
Natural gas prices, an essential energy input for construction, have dropped significantly by 24.8% year-on-year, although they remain slightly above 2020 levels at 3.2%.
Overall, while the construction material market is no longer at the dramatic highs seen during COVID-19, prices have not returned to pre-pandemic levels, and many commodities remain elevated. For contractors and developers, this means that while there may be some short-term price relief, longer-term planning must still account for elevated baseline costs.
Understanding these trends is essential for accurate project budgeting and negotiating contracts that accommodate potential price escalations. As the market stabilizes, staying informed on monthly PPI data will be critical for those navigating the complex construction landscape. Morris Manning & Martin will continue to review these market trends and provide the necessary updates to keep you informed.
Morris, Manning & Martin’s Construction Law Practice Group is experienced in representing owners and developers in the drafting and negotiation of their design, consulting, and construction agreements. If you need any assistance in the process of retaining Architects, Engineers, Contractors, or Consultants for your development projects, please contact Bruce Smith, chair of MMM’s Construction Law Practice Group, Colby Nelson, or JD Howard.
