Area Economy

Construction materials prices dip for second month

September 18, 2015
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Prices for inputs to construction industries declined 0.1 percent in July after increasing 0.2 percent in June, according to the latest producer price index report from the U.S. Bureau of Labor Statistics.

Year-over-year prices were down 3 percent in July and have been down on an annual basis for each of the past eight months. Prices of inputs to nonresidential construction industries declined 0.3 percent on a monthly basis and are down 3.9 percent on a yearly basis.

Prices for inputs to the construction industry fell 0.9 percent in August after shedding 0.1 percent in July. Inputs to nonresidential construction behaved similarly, losing 0.8 percent for the month and 4.7 percent for the year.

On a year-over-year basis, prices were down 3.9 percent for the month and have fallen by at least 2.8 percent in each month this year. Prices now have fallen on a yearly basis in nine consecutive months, the longest such streak since March to November of 2009.

Commodity markets were particularly frenzied in August due to a series of events in China, Brazil, Iran and other parts of the world. The result is that input prices continue to slide lower, defying predictions from earlier this year suggesting that commodity prices would stabilize and at some point head higher. Global demand remains low and there is a chance that prices could fall even lower during the months ahead.

This is good news for most contractors, with the obvious exception being those in commodity-rich communities. Already, North Dakota, Oklahoma, New Mexico and Alaska are deemed to be at risk of recession, and the ongoing slide in commodity prices will only serve to further weaken those economies and suppress overall construction activity.

Only three key input prices rose in August:

  • Prepared asphalt, tar roofing and siding expanded 2.2 percent for the month and 2.4 percent for the year.
  • Natural gas prices expanded 2.2 percent on a monthly basis but are down 29.2 percent for the year.
  • Plumbing fixtures and fittings expanded 0.2 percent from July and are up 1.2 percent from August 2014.

The key input prices that fell or remained flat include:

  • Crude energy materials prices fell 9.5 percent in August and are down 40.5 percent from the same time last year.
  • Fabricated structural metal product prices remained unchanged for the month and are down 0.4 percent on the year.
  • Iron and steel prices fell 2.9 percent for the month and 17.6 percent for the year.
  • Prices for steel mill products fell 0.7 percent from last month and 14.1 percent from last year.
  • Nonferrous wire and cable prices are down 1.1 percent in August and 6.9 percent from the same time last year.
  • Softwood lumber prices fell 3.2 percent on a monthly basis and 7.5 percent on a yearly basis.
  • Prices for concrete products inched 0.2 percent lower in August but are up 2.6 percent from the same time last year.
  • Crude petroleum prices plummeted 20 percent in August and are down 57.3 percent from the same time last year.

 Anirban Basu is chief economist for Associated Builders and Contractors.

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