Materials prices dip slightly, but still up over last year
Construction materials prices inched down 0.1 percent in September, but rose 1.6 percent compared to the same time last year, according to the U.S. Department of Labor's Producer Price Index released earlier this month.
Prices for inputs to construction industries have remained unchanged from June to August — the longest such period since the price index for construction inputs began in 1986. Inputs to nonresidential construction fell 0.2 percent for the month, but were 1 percent higher than in September 2013.
Crude energy materials prices declined 1 percent in September and are 7.9 percent lower than one year ago. Natural gas prices climbed 4 percent in September after decreasing in the three previous months. However, on a year-over-year basis, natural gas prices have expanded for 22 consecutive months.
The decline in oil prices has been stunning and is largely in response to growing evidence of weakness in Europe. Forecasts of European economic performance are seemingly being downgraded on a daily basis, including forecasts of Germany's economy, which heretofore has been a reasonably strong performer.
Without the decline in oil prices, which could fall even further looking ahead, materials prices in the aggregate would not have decreased in September. In fact, a number of materials prices actually increased during the month, including iron and steel (0.5 percent) and softwood lumber (2.7 percent). Stakeholders also should note that the U.S. dollar has been rising for much of 2014, which has a tendency to suppress materials price increases.
The following materials prices increased in September:
- Softwood lumber prices expanded 2.7 percent and are 10.2 percent higher than one year ago.
- Prices for plumbing fixtures expanded 0.1 percent in September and are up 3.1 percent on a year-over-year basis.
- Steel mill products prices rose 0.1 percent for the month and are 4.7 percent higher than one year ago.
- Nonferrous wire and cable prices grew 0.1 percent on a monthly basis, but are unchanged from one year ago.
- Prices for prepared asphalt, tar roofing and siding expanded 0.2 percent for the month, but are down 9.8 percent on a year-ago basis.
- Iron and steel prices expanded 0.5 percent in September and are up 4.6 percent from the same time last year.
- Natural gas prices expanded 4 percent in September and are 9.9 percent higher than one year ago.
Four of the 11 key construction inputs did not experience price increases for the month. These included:
- Concrete products prices fell 0.3 percent in September, but are up 3.6 percent on a year-over-year basis.
- Fabricated structural metal products remained flat for the month and have expanded 1.9 percent on a year-over-year basis.
- Crude petroleum prices fell 3.9 percent in September and are down 15.5 percent from the same time last year.
- Crude energy materials prices fell 1 percent in September and are 7.9 percent lower year over year.
Anirban Basu is chief economist for Associated Builders and Contractors.