ABC Reports: Construction Materials Prices Slip 0.1 Percent in June

“The forces that had motivated higher commodity prices earlier this year appear to have eased.” —ABC Chief Economist Anirban Basu.

In a small sign of good news for the nation’s builders, prices for construction materials slipped 0.1 percent in June, according to the July 14 Producer Price Index report by the U.S. Labor Department. However, construction materials prices increased 2.3 percent over the last quarter, and jumped 8.3 percent over the last twelve months.

(See Analysis below)

 

Also trending lower, iron and steel prices fell for the first time since last October, down 0.5 percent in June. For the quarter, iron and steel prices increased 1 percent and are 9.5 percent higher than the same time last year. Steel mill product prices fell 1.7 percent but still increased 1.5 percent for the quarter and 7 percent from June 2010. Concrete product prices slipped 0.1 percent for the month while prices inched up 0.1 percent for the quarter and decreased 0.2 percent year-over-year.

In contrast, prices for prepared asphalt, tar roofing, and siding jumped 4 percent for the month and are 4.3 percent higher than the same time last year. Softwood lumber prices increased 1.8 percent in June, but were down 5.3 percent for the quarter and down 3.2 percent year-over-year. Prices for plumbing fixtures and fittings increased by 0.6 percent for the month, up 0.2 percent for the quarter, and are 13.2 percent higher than the same time last year. Nonferrous wire and cable prices rose 0.4 percent in June, up 0.2 percent in the second quarter and 13.2 percent higher over the last twelve months. Prices for fabricated structural metal products inched up 0.2 percent for the month, 1.2 percent higher for the quarter, and up 5.3 percent from June 2010.

Crude energy prices decreased for the second straight month, down 4.1 percent in June. For the quarter, crude energy prices dipped 4.8 percent, but are still 18.6 percent higher than the same time last year. Overall, the nation’s wholesale good prices decreased for the first time in a year, slipping 0.4 percent for the month. For the second quarter, wholesale good prices increased 0.6 percent while prices are 7 percent higher than June 2010.

Analysis

“Today’s report on construction materials prices offers a glimmer of hope,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. “However, the euphoria may not last long.

“With the U.S. Federal Reserve announcing the end of the second round of quantitative easing, and signs of economic slowing in much of Europe, portions of Asia and in the United States, the forces that had motivated higher commodity prices earlier this year appear to have eased,” said Basu.

“Construction materials prices fell for the first time since last September. The government also recently released data indicating that overall import prices fell in June, largely attributable to a decline in oil prices,” Basu said.

“Still, the good news on materials prices may be short-lived,” said Basu. “In light of recent economic weakness, the Federal Reserve has begun to suggest that further monetary easing may be necessary.

“Further, with ongoing concerns regarding Greece, Italy, along with other debt, and with the U.S. facing a debt ceiling standoff, investors are quite likely to shift some of their investments from bonds into other assets, including commodities,” Basu said. “This would have the effect of reigniting commodity price increases.”

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