Construction input prices decreased 0.9 percent in May compared to the previous month, according to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics' Producer Price Index data released June 13. Nonresidential construction input prices decreased 0.8 percent for the month.

Overall construction input prices are 2.1 percent higher than a year ago, while nonresidential construction input prices are 2.2 percent higher. Prices decreased in 2 of the 3 energy subcategories last month. Crude petroleum prices were down 8.7 percent, while unprocessed energy materials prices decreased 6.6 percent. Natural gas prices were up by 1.7 percent.

"For contractors, this data provides excellent news along two fronts," said ABC Chief Economist Anirban Basu.

"First, construction input prices fell for the first time since December and, despite rising somewhat sharply over the first four months of 2024, are up just 2.1 percent year over year. Second, the Producer Price Index's economywide measure of final demand prices fell in May. This, along with yesterday's cooler than expected Consumer Price Index data, signals slowing inflation and that the Federal Reserve may begin to cut rates sooner than expected.

"With contractor confidence regarding profit margins at the lowest level in seven months according to ABC's Construction Confidence Index, falling materials prices and the prospect of lower interest rates in 2024 are welcome developments for the construction industry."

For more information, visit abc.org/economics .

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