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Stronger dollar, weaker global economy impact input prices
The Producer Price Index for inputs to construction industries declined for a fourth consecutive month in October, according to an analysis of the Bureau of Labor Statistics data released this month.
The index stands at its lowest level since the first quarter of 2011 as prices for construction inputs declined 0.2 percent on a monthly basis and 4.6 percent on a year-ago basis. Nonresidential construction input prices exhibit a similar pattern, falling 0.3 percent since last month and 5.1 percent over the past 12 months. Nine of 11 key input prices are down on a year-over-year basis.
The dollar has continued to increase in value into November against a variety of globally important currencies, including the euro, yen and Canadian dollar.
Commodity prices, including oil and copper, continue to plummet largely as a result of the strong dollar, though weaker than anticipated economic performance in key emerging nations is also playing a part, including in China, Russia and Brazil.
Unless this changes over the course of the latter part of November, it will represent a fifth consecutive month of construction industry input price declines.
Six key input prices rose or remained unchanged in October on a monthly basis, while one remained unchanged:
- Crude petroleum prices expanded by 8.2 percent in October, but are down 43.6 percent from the same time last year.
- Crude energy materials prices grew by 3 percent in October, but are still down 33.4 percent on a yearly basis.
- Softwood lumber prices rose by 1.6 percent on a monthly basis, but are down 9 percent on a yearly basis.
- Fabricated structural metal product prices ticked up 0.2 percent in October, but are down 0.6 percent from one year ago.
- Plumbing fixtures and fittings prices inched up 0.1 percent for the month and are up 1.2 percent from October 2014.
- Nonferrous wire and cable prices increased by 0.1 percent on a monthly basis but fell 7.4 percent on a yearly basis.
- Concrete product prices were unchanged from September and have expanded 2.6 percent from the same time last year.
Four key input prices fell in October on a monthly basis:
- Prepared asphalt, tar roofing and siding prices dipped 0.3 percent for the month and are down 2.4 percent for the year.
- Steel mill product prices fell 1.7 percent in October and are 16.1 percent lower than one year ago.
- Natural gas prices shrank 1.8 percent on a monthly basis and 36 percent on a yearly basis.
- Iron and steel prices lost 4.4 percent month-over-month and 21.2 percent year-over-year.
Anirban Basu is chief economist of Associated Builders and Contractors.