Construction Materials Prices Rise for First Time in Six Months

by Jonathan McGaha | 12 March 2015 12:00 am

The largest monthly gain in petroleum prices in over three years caused construction materials prices to expand 0.4 percent in February, ending a six-month streak when prices failed to rise, according to the March 13 producer price index release by the Bureau of Labor Statistics[1]. On a year-over-year basis, construction input prices fell 3.9 percent. Nonresidential construction input prices also rose 0.4 percent on a monthly basis and were down 4.9 percent on a yearly basis.

“While conventional wisdom suggests that oil and natural gas prices will eventually rise, the adjustment period could be a lengthy one and although crude petroleum prices were up 12.3 percent on a monthly basis, this is likely a function of an abnormally cold February,” said Associated Builders and Contractors[2] Chief Economist Anirban Basu. “This rise is the first monthly gain since April 2014 and the eighth consecutive month in which petroleum prices were down on a year-over-year basis.

“For now, inventories of fuel remain elevated and most believe that the U.S. dollar’s upward movement is not at an end,” said Basu. “This, in addition to the quantitative easing that has begun in Europe and the potential for increasing interest rates in America, means that there is likely to be greater demand for U.S. fixed income assets, which will serve to further strengthen the U.S. dollar and put downward pressure on certain key construction input prices. This dynamic was widely apparent in February, during which prices for seven of the 11 key construction inputs failed to rise and no input other than crude petroleum increased in excess of one percent.”

The following materials prices increased in February.

• Nonferrous wire and cable prices grew 0.8 percent on a monthly basis but fell 4.4 percent on a yearly basis
• Crude petroleum prices gained 12.3 percent in February but are down 53.4 percent from the same time last year.
• Crude energy materials prices expanded 0.9 percent in February but are 45 percent lower year-over-year.
• Concrete products prices expanded 0.2 percent in February and are up 4.3 percent on a yearly basis.

Seven of the 11 key construction inputs did not expand for the month.

• Prices for plumbing fixtures fell 0.1 percent in February but are up 3 percent on a year-over-year basis.
• Fabricated structural metal product prices remained flat for the month and have expanded 1 percent on a year-over-year basis.
• Prices for prepared asphalt, tar roofing, and siding fell 1.4 percent for the month but are up 1.7 percent on a year-ago basis.
• Iron and steel prices fell 5.4 percent in February and are down 10.6 percent from the same time last year.
• Steel mill products prices fell 1.8 percent for the month and are 3.6 percent lower than one year ago.
• Softwood lumber prices fell 3.7 percent in February and are 4.4 percent lower than one year ago.
• Natural gas prices fell 11.2 percent in February and are down 51.8 percent from one year ago.

To view the previous PPI report, click
here.

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