ABC Reports: Construction Materials Prices Slip 0.1 Percent in November

“The decline in construction materials prices is most welcome and may induce a larger number of projects to move forward than expected.” —ABC Chief Economist Anirban Basu.

In a reflection of slow construction activity, construction materials prices slipped 0.1 percent in November, according to the December 15 Producer Price Index (PPI) report by the U.S. Labor Department. However, construction materials prices are still 6.2 percent higher compared to the same time last year.

Nonresidential construction materials prices were unchanged for the month and are 7 percent higher than November 2010.

Iron and steel prices decreased 2.4 percent in November, but are still 11.8 percent higher than the same time last year. Steel mill product prices fell 1.2 percent for the month, but are up 13 percent year over year. Likewise, softwood lumber prices are down 1.2 percent compared to October, but are 1.7 percent higher than November 2011. Prices for prepared asphalt, tar roofing, and siding dropped 5.4 percent for the month, but is still up 1.7 percent from November 2010. Prices for plumbing fixtures and fittings were unchanged in November, but are 2.8 percent higher than one year ago.

In contrast, prices for nonferrous wire and cable increased 3.7 percent in November and are up 1.2 percent year over year. Prices for concrete products inched up 0.6 percent for the month and increased 0.9 percent during the last twelve months. Prices for fabricated structural metal products edged up 0.4 percent for the month and are 5.7 percent higher than one year ago.

Crude energy prices jumped 10.5 percent in November as crude petroleum prices surged 22.7 percent. Crude energy prices are 19.3 percent higher than in November 2010. Overall, the nation’s wholesale prices increased 0.3 percent for the month and are 5.9 percent higher than one year ago.

Analysis

“Today’s report on construction material prices is a reflection of U.S. and global construction activity,” said Associated Builders and Contractors Chief Economist Anirban Basu. “A number of factors have transpired to end the cycle of rising construction materials prices, including the rise of the U.S. dollar.

“The dollar has gained strength against a number of currencies during a period of global economic unrest and uncertainty,” Basu said. “Given the tumult in Europe, the dollar is likely to remain unusually stable in the weeks ahead.

“The other major factor is the slowing of key emerging economies, including China, India and Brazil,” said Basu. “The Brazilian economy was flat during the third quarter and the Chinese economy is facing its first real slowdown in years.

“There has continued to be downward pressure on commodity prices,” Basu said. “This is likely to translate into additional declines in construction materials prices as we approach 2012 and beyond. However, the decline in construction materials prices is most welcome and may induce a larger number of projects to move forward than expected.”

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