LBM Dealers Plan to Increasingly Pass Along Product Price Hikes, Survey Suggests

By Craig Webb, President, Webb Analytics

One of the best and freshest surveys of construction supply suggests dealers are increasingly paying higher prices for goods and increasingly likely to pass along those increases to customers.

The findings come from the Census Bureau's Business Trends and Outlook Survey (BTOS), a poll of businesses conducted twice a month. The results above show answers from roughly 2,250 businesses categorized as building material and garden equipment and supplies stores. This group is a subset of the roughly 200,000 businesses polled in each survey.

More than six of 10 dealers said they have paid more for goods in the past two weeks (roughly the last half of May), but only four out of 10 increased their prices. But six months from now, the percentage of dealers expecting to pay more rises by nearly eight percentage points, to 68.9%, while the percentage expecting to pass along increases grows by a dozen points to 53.5%.

Put another way: Dealers passed along about two-thirds of the higher prices in late May. But six months from now, they expect to pass along close to three-quarters of the coming increases.

BTOS' total survey audience is roughly 1.2 million, broken into six groups. Thus, one can assume this same group was polled seven surveys back, during March 10-23. That was around when some exteriors product manufacturers were putting price increases into effect but before the shock of President Trump's "Liberation Day" announcement. Back then, 46.7% said they had paid more in the previous two weeks (vs. 61.0% most recently), and 31.0% charged more (vs. 40.9%). That's about the same two-thirds pass-along rate as the latest survey.

Of course, there's a difference between action and intention. It could be that, six months from now, dealers will find so much resistance to higher prices that they will struggle to pass them along. If that happens, construction supply companies will be forced to choose what they want most: sales volume or profit margin. They might have to retreat to a two-thirds pass-along rate--or even less.