Construction Material Prices Rise Month-to-Month, Remain Historically Low

by Jonathan McGaha | 12 May 2016 12:00 am

Construction input prices expanded on a monthly basis for the second consecutive month in April, increasing by 0.5 percent according to an analysis of the Bureau of Labor Statistics[1] (BLS) Producer Price Index[2] released today by Associated Builders and Contractors[3] (ABC). The two-month growth streak follows nine consecutive months during which construction input prices fell and construction input prices remain 2.9 percent below their April 2015 levels.

Prices have now decreased on a year-over-year basis for seventeen consecutive months. Nonresidential construction inputs behaved similarly, expanding 0.5 percent month-over-month but falling 3.1 percent year-over-year.

“Despite the end of month-to-month materials price decreases, prices remain low by historic standards and will likely continue to do so for the foreseeable future,” said ABC Chief Economist Anirban Basu. “Commodity prices, including oil prices, have been edging higher lately in response to a number of potentially temporary phenomena, including a weakening U.S. dollar. Coming into the year, the presumption among many market participants was that U.S. interest rates would rise meaningfully, thereby increasing the value of the dollar. Contrary to expectations, interest rates have not risen significantly, and the dollar has been weakening in response.

“That has helped to set the stage for the recent bounce-back in oil and certain other commodity prices,” said Basu. “Other factors have not been as supportive, including a still-weak global economy. Global economic weakness is likely to persist, and the dollar may begin to strengthen again. This means that construction firm managers should not assume that oil and other prices will rise steadily. In fact, reversals in commodity prices remain quite possible. While oil prices have risen sharply since lows achieved earlier this year, copper, natural gas and other prices have expanded only modestly. The next materials price report could easily show further inflation. The story of inexpensive materials will continue to be told.”

Eight key input prices rose in April on a monthly basis:

• Crude petroleum prices expanded 17.6 percent from March 2016 but are down 22.4 percent from April 2015.
• Unprocessed energy material prices rose 9 percent on a monthly basis but fell 18.2 percent on a year-ago basis.
• Prices for steel mill products are up 2 percent on a monthly basis but down 11.3 percent on a yearly basis.
• Iron and steel prices expanded 4.9 percent month-over-month but declined 8.6 percent year-over-year.
• Softwood lumber prices grew 2.7 percent for the month and 1.8 percent from April 2015.
• Concrete product prices expanded by 0.7 percent month-over-month and are up 3.1 percent year-over-year.
• Natural gas prices increased 8.4 percent for the month but are down 25.7 percent from the same period one year ago.
• Fabricated structural metal prices products rose 0.2 percent month-over-month but decreased 2 percent year-over-year.

Three key input prices declined on a monthly basis:

• Prices for prepared asphalt and tar and roofing and siding products fell by 1.9 percent from March 2016 and are down 1.5 percent from April 2015.
• Prices for plumbing fixtures and fittings fell 0.1 percent for the month but are up 0.1 percent from the same time last year.
• Nonferrous wire and cable prices fell 0.3 percent on a monthly basis and 6.1 percent on a yearly basis.

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