“The magic of economics rests with its self-equilibrating mechanisms. These mechanisms are designed to prevent economies from severe overheating or intolerable contraction,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu.
“Producer prices represent a perfect example. When the economy is expanding, producer prices rise, making it more expensive for suppliers to expand, which limits the pace of expansion,” said Basu. “However, with the economy shrinking as it is now, producer prices tend to decline, which induces cost-efficient supply and limits the extent of the downturn.
“Recent reports indicate that a combination of factors continues to place upward pressure on construction input prices despite the ongoing global economic downturn,” said Basu. “One of those factors is China, which has introduced its own stimulus package of several hundreds of billions dollars with an intense focus on infrastructure.
“Moreover, the U.S. stimulus package is also likely having an impact on materials prices due to the anticipation of significant future construction. However, input prices are not declining as one would otherwise predict,” said Basu.