The government’s report on inflation in March showed the first month-to-month drop in consumer prices in almost a year, but the data on core inflation and producer prices showed that the prevailing trend is still upward. March’s Consumer Price Index (CPI) fell 0.1 percent from February, owing entirely to declines in the price of gasoline. Core CPI, which excludes volatile energy and food components, rose 0.2 percent in March and 2.1 percent year-over-year. That increase continued the trend of growing year-over-year inflation. Producer prices rose three percent compared to March 2017.
Data released by the Bureau of Labor Statistics (BLS) on April 10 confirmed growing anecdotal evidence that prices for construction-related materials are rising much faster than overall inflation. The producer price index (PPI) for inputs to construction rose 0.8 percent in March alone and 5.8 percent compared to March 2017, the largest year-over-year increase in seven years.
The increases were observed across a broad spectrum of materials, including those that will be subject to tariffs. Those tariffs, coupled with growing demand for a number of short items like lumber and plywood, are providing the impetus for manufacturers of all products to test the markets to accept pent-up price increases. One of the industry’s leading associations raised concerns that tariffs on some items might lead to project delays and cancellations if supplies become unobtainable or too expensive for current budgets.
“Prices increased for many items in March, even before tariffs announced for steel, aluminum and many items imported from China have taken effect,” said Ken Simonson, chief economist for the Associated General Contractors of America. “Steel service centers and other suppliers are warning there is not enough capacity at U.S. mills or in the trucking industry to deliver orders on a timely basis. Thus, contractors are likely to experience still higher prices as well as delivery delays in coming months.”
From March 2017 to March 2018, the PPI jumped by 13.7 percent for lumber and plywood, 11.4 percent for aluminum mill shapes, and 4.9 percent for steel mill products.