Building Costs in Flux: Analyzing Inflation’s Effect on Construction Materials

In Skender’s latest economics report, we provide insights and analysis of the recent trends in construction material prices, drawing from the U.S. Bureau of Labor Statistics data, to highlight significant swings from March 2020 to March 2024. The report focuses on key materials like steel, concrete, gypsum, lumber and petroleum-based products, emphasizing the volatility in prices amid global economic shifts and supply chain challenges.

Inflation has significantly impacted construction material prices over the past four years. The recent stabilization or decline in some prices suggests improved supply chains, but consistent cost increases in key materials highlight the need for strategic planning and lean building processes to optimize costs, improve efficiency and mitigate risk.

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Here are the key findings:

Observations:

• • High volatility in certain materials: Overall, materials that heavily rely on petroleum and energy products exhibit high volatility, significantly impacting construction costs.
  • Recent stabilization and decline: In the past 12 months (April 2023 to March 2024), the prices for some materials stabilized or declined. Notably, refined petroleum products, lumber, steel mill products, and copper wire and cable experienced price declines, which could be attributed to stabilizing supply chains and reduced demand. Concrete products remain relatively stable, yet they consistently trend upward.
  • Consistent Price Increases in Concrete Products: Precast concrete products (+38.3%) and ready-mix concrete (+33.2%) showed steady price increases, which align with the rising costs of raw materials and labor shortages affecting the construction industry.

Long-Term Trends (April 2020 – March 2024):

• • Significant increases were observed in specific construction materials, such as steel mill products (+62.6%), gypsum building materials (+50.7%), and plastic construction products (+48.5%).
    • Steel mill products include hot-rolled steel, cold-rolled steel, pipes and tubes, bars and rods, and plates. Cold-rolled steel sheets are hot-rolled steel with additional processing at room temperature to create thinner sheets and improve surface finish.
    • Gypsum building materials include drywall, plaster, ceiling tiles, joint compounds and panels.
    • Plastic construction products include plastic pipes, such as polyvinyl chloride (PVC) and cross-linked polyethylene (PEX), insulation materials, plastic-based flooring materials, siding and panels, windows and doors made from PVC or other plastic composites, plastic roofing and gutters.
  • Refined petroleum products showed an even higher increase (+98.7%), highlighting significant volatility in oil-based products.
    • Key refined petroleum products include gasoline, diesel fuel, asphalt and lubricants.
  • Other materials like copper wire and cable (+37.3%), precast concrete products (+38.3%), and ready-mix concrete (+33.2%) also saw substantial price increases.
    • Key copper wire and cable products include building wire, power cable, communications cable, magnet wire, and control and instrumentation cable.
    • Precast concrete products include panels, pipes, blocks, pavers, columns, barriers, utility structures and architectural precast concrete elements.
    • Ready-mix concrete is a mixture of cement, water, aggregates (sand, gravel or crushed stone) and sometimes additives to enhance properties like setting time, workability or durability. It is typically used for foundations, slabs, pavements and structures.

Short-Term Trends (April 2023 – March 2024):

• • Cold-rolled steel sheets and strips (+12.8%) and precast concrete products (+6.9%) had the highest price increases over the last year.
  • However, many construction materials experienced price decreases: refined petroleum products (-4.1%), lumber (-3.5%), steel mill products (-4.3%), copper wire and cable (-4.6%), and plastic construction products (-2.7%).