Construction materials prices dominated by crisis economics
Prices for inputs to construction industries expanded 0.2 percent in June after increasing 1.1 percent in May.
Year-over-year prices were down 2.2 percent in June, and prices have not increased on an annual basis for the past seven months. The last time this occurred was the third and fourth quarters of 2009, when the global economy was still reeling from the financial crisis; however, June's year-over-year decline in construction input prices was the smallest of 2015.
Prices of inputs to nonresidential construction industries rose 0.3 percent on a monthly basis, but are down 3.6 percent on a yearly basis.
The June figures do not fully reflect the recent decline in global commodity prices ranging from oil to copper. The marketplace continues to be dominated by crisis economics, with the most recent crisis revolving around Greece. In such circumstances, the market response is to project slower global economic growth and drive commodity prices lower.
The specter of Iranian oil flowing into global markets also has impacted certain key input prices. Therefore, June's monthly input price increase should not be viewed as the beginning of a new trend. At some point, input prices will begin to rise, perhaps aggressively, but that time has not yet arrived.
One of the other major impacts of recent global news has been a stronger U.S. dollar. A stronger dollar yields many implications, one of them being that commodity prices are likely to remain reasonably well-behaved.
Stakeholders should not expect a sudden surge in input prices anytime soon, though the potential resolution of the Greek debt crisis for now could also indicate that significant price declines are also not forthcoming in most input categories.
Interestingly, only five key input prices rose in June, while six fell or were flat. The key input prices that increased in June are:
- Crude energy materials prices were up 2.2 percent in June, but are 36 percent lower year-over-year.
- Fabricated structural metal product prices rose 0.5 percent for the month and have expanded 0.6 percent on a year-over-year basis.
- Natural gas prices expanded 12.9 percent in June, but are down 39.6 percent from the same time one year ago.
- Iron and steel prices expanded 0.8 percent in June, but are down 13.9 percent from the same time last year.
- Softwood lumber prices expanded 3.6 percent, but are 6.2 percent lower than a year ago.
The key construction inputs that did not expand for the month include:
- Prices for plumbing fixtures remained flat in June and are up 1.2 percent on a year-over-year basis.
- Prices for prepared asphalt, tar roofing and siding fell 1.4 percent for the month and are down 1.2 percent on a year-ago basis.
- Steel mill products prices fell 1 percent for the month and are 12.2 percent lower than one year ago.
- Concrete product prices fell 0.1 percent in June, but are up 4.2 percent on a yearly basis.
- Crude petroleum prices fell 1.4 percent in June and are down 44.0 percent from the same time one year ago.
- Nonferrous wire and cable prices fell 0.8 percent on a monthly basis and are down 3.1 percent on a yearly basis.
Anirban Basu is chief economist of Associated Builders and Contractors.