Tag Archive for 'construction materials'

ABC Reports: Overall Construction Input Prices Firm in December as Energy Prices Surge

Construction input prices rebounded in December after experiencing a steep decline in November, according to analysis of U.S. Bureau of Labor Statistics data released today by Associated Builders and Contractors (ABC). Input prices rose 0.4 percent for the month and are up 2.1 percent year-over-year, the largest 12-month increase in 30 months.

Nonresidential input prices collectively experienced a slightly larger increase, due in part to surging iron and steel prices, rising 0.6 percent for the month and 2.2 percent on the year. Though a number of input categories have experienced significant increases in prices in recent months, the overall price gains are largely attributable to energy prices. Crude petroleum prices rose 18.9 percent for the month, natural gas prices rose 23.1 percent and unprocessed energy materials rose 14.6 percent. Concrete products and the category that includes prepared asphalt experienced minimal declines in prices in December.

“While there are a number of factors that have contributed to the recent firming in input prices, recent deals made by OPEC and non-OPEC members to suppress oil production is the most consequential,” said ABC Chief Economist Anirban Basu. “While oil prices remain above where they were before production agreements were reached, the price of oil has generally failed to rise much beyond $50.

“Other factors have also led to a steady rise in materials prices including an improving global economy,” said Basu. “While not accelerating dramatically, global economic growth in 2017 is expected to exceed 2016’s performance, with nations like Brazil and Russia no longer mired in deep recessions. U.S. economic growth is also expected to be stronger in 2017, lifting the overall global economic outlook and supporting more bullish commodity markets.

“It is probably too early for contractors to become excessively preoccupied with rising materials prices,” said Basu. “Despite recent signs of economic improvement, massive levels of debt and commercial vacancy in much of the world will constrain both worldwide economic growth and global construction. Moreover, commodity traders among others are well aware that the planet is physically able to supply plenty of oil, natural gas and many other commodities, particularly if prices rise further. That knowledge in and of itself tends to place a lid on input price increases absent a major geopolitical event.”

December Construction Input Prices

IHS Market Reports: Construction Costs End 2016 on a High Note

Continuing the recovery after a 22-month price slump

Construction costs rose for the second straight month, according to IHS Markit (Nasdaq: INFO) and the Procurement Executives Group (PEG). The headline current IHS PEG Engineering and Construction Cost Index registered 53.3, up from 50.7 in November, continuing the recovery after a 22-month slump in prices. Strength was evident in both labor and material markets.

The current materials/equipment price index came in at 53.3 in December after two months of falling prices. Six of twelve categories tracked in the materials sub-index showed rising prices, three had falling prices, and prices remained unchanged in three categories. Pumps and compressors registered falling prices once again; prices have been falling for this category for almost 17 months. Exchangers had a similar profile, with prices only reaching the neutral mark this month after falling for 16 months. Weakness in these two categories indicates the recent strength in raw materials has yet to filter uniformly into intermediate and final goods.

“Notwithstanding the stronger readings of the past two months in the materials/equipment index, upstream commodity prices look exposed at the moment and poised for a correction,” said John Mothersole, director of research at IHS Pricing and Purchasing. “While we do see leverage becoming more evenly balanced between buyers and suppliers in 2017, we expect upstream commodity markets to reset in the months immediately ahead with prices pulling back at least temporarily to better reflect underlying fundamentals.”

The current subcontractor labor index came in at 53.1 in December, slightly lower than the 54.1 November reading, but still presenting positive momentum. In the Northeast, Midwest and Southern United States, labor costs rose; in the West, costs remained the same as last month. Even areas affected by the downturn in energy markets are feeling the effects of a tightening labor market. In Canada, labor costs remained the same in both eastern and western regions.

The six-month headline expectations index recorded another month of increasing prices, with the index moving from 65.1 in November to a strong 68.9 in December. The materials/equipment index rose from 66.4 to 73.3, affirming widespread expectations of higher future prices. Every component showed rising prices; there were no expectations for softer materials prices. Sub-contractor labor price expectations came in at 58.7 in December, slightly lower than the November figure of 61.9. In the United States labor costs are expected to rise in every region. In Canada, labor costs are expected to remain the same.

In the survey comments, respondents have noted no supply shortages of materials. Proposal activity has registered an uptick in the recent months, and participants are showing increased optimism for 2017.

To learn more about the new IHS PEG Engineering and Construction Cost Index or to obtain the latest published insight, please click here.

About IHS Markit (www.ihsmarkit.com)

IHS Markit (Nasdaq: INFO) is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 key business and government customers, including 85 percent of the Fortune Global 500 and the world’s leading financial institutions.  Headquartered in London, IHS Markit is committed to sustainable, profitable growth.

IHS Markit is a registered trademark of IHS Markit Ltd. All other company and product names may be trademarks of their respective owners © 2016 IHS Markit Ltd. All rights reserved.

ABC Reports: Construction Materials Prices Remain Tame in April

CEU2“April marks only the second time that price increases have been so suppressed over such a prolonged period.” —ABC Chief Economist Anirban Basu.

PPI_April15Prices for inputs to construction industries fell by 0.1 percent in April, ending a two month streak during which material prices expanded by greater than 0.4 percent. Prices have now fallen in six of the previous eight months and input prices are also down on a year-over-year basis, falling 4 percent since April 2014. This represents the greatest year-over-year decline since October 2009 and year-over-year input prices have now declined for 5 straight months after expanding in each of the previous 60 months. Prices for inputs to nonresidential construction showed a similar decline, falling 0.1 percent for the month and 5.1 percent year-over-year. Crude petroleum prices expanded for only the second time in the previous ten months, growing by 13.1 percent, the largest month-over-month increase since November 2011.

“Construction input prices have now fallen by greater three percent on a yearly-basis in each of the year’s first four months,” said Associated Builders and Contractors Chief Economist Anirban Basu. “This is only the second time that price increases have been so suppressed over such a prolonged period and the first since the middle of the financial crisis in the second and third quarter of 2009. That said, the underlying dynamics of this period of downward trending prices are fundamentally different than those experienced in 2009.

“Two major factors contributed to April’s falling prices,” said Basu. “The strong U.S. dollar, which has expanded by over ten percent against the currencies of the United States’ primary trading partners, has neutralized any underlying inflationary pressures. The other key factor in the subdued price growth is lower energy prices. Consider that prices for crude petroleum, natural gas, and crude energy materials are all over 40 percent lower than in April 2014.

“The U.S. economy continues to disappoint as the expectation had been that the U.S. economy would significantly outperform the balance of the advanced world’s economy this year,” said Basu. “While there is still a chance that that could happen, several sectors of the economy continue to underperform, none worse than retail. Data released yesterday indicate that sales remain flat despite improved weather.

“One of the byproducts of a slow economic start has been a weakening dollar,” said Basu. “Most forecasters had predicted that the U.S. dollar would march toward parity with the Euro. That hasn’t happened and as of this morning, one euro buys $1.14. A weakening dollar is consistent with rising input prices, and should lead to renewed price growth in the near future. For now, however, the impact of previous increases in the value of the dollar are dominating price dynamics.”

Only four of the key materials prices increased in April.

  • Softwood lumber prices expanded 2.6 percent but are 4.7 percent lower than one year ago.
  • Crude petroleum prices expanded 13.1 percent in April but are down 50.4 percent from the same time last year.
  • Crude energy materials prices gained 1.7 percent in April but are 42.2 percent lower year-over-year.
  • Concrete products prices grew 1.3 percent in April and are up 5.1 percent on a yearly basis.

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

  • Fabricated structural metal product prices dropped 0.5 percent lower for the month but have expanded 0.8 percent on a year-over-year basis.
  • Natural gas prices fell 11.8 percent in April and are down 47.9 percent from the same time one year ago.
  • Prices for plumbing fixtures fell 0.1 percent in April, but are up 1.5 percent on a year-over-year basis.
  • Prices for prepared asphalt, tar roofing, and siding fell 2.5 percent for the month and are down 1.9 percent on a year-ago basis.
  • Iron and steel prices fell 2 percent in April and are down 14.5 percent from the same time last year.
  • Steel mill products prices fell 3.4 percent for the month and are 8.7 percent lower than one year ago.
  • Nonferrous wire and cable prices fell 0.3 percent on a monthly basis and shed 2.8 percent on a yearly basis.

To view the previous PPI report, click here

ABC Reports: Construction Materials Prices Expand in March

CEU2“Although overall construction materials prices rose for the month, prices for more categories of materials decreased than increased” —ABC Chief Economist Anirban Basu.

PPI_Mar15Prices for inputs to construction industries expanded 0.8 percent in March, the largest monthly increase in more than two years, according to the April 14 producer price index release by the Bureau of Labor Statistics. Prices have now expanded for two consecutive months after declining during the prior six; however input prices are down 3.6 percent on a year-over-year basis. March marks the fourth consecutive month year-over-year input prices have declined, the longest such streak since 2009. Crude petroleum prices fell 4 percent in March and have fallen in eight of the previous nine months.

“Although overall construction materials prices rose for the month, prices for more categories of materials decreased than increased, including sharp monthly declines in the price for softwood lumber and iron/steel,” said Associated Builders and Contractors Chief Economist Anirban Basu. “On a year-over-year basis, deflationary pressures are even more apparent as crude petroleum prices are down 55 percent and natural gas is down 45 percent, despite an increase in gas prices in March.

“Though U.S. nonresidential and residential segments continue to expand, global construction volumes remain suppressed by widespread weakness in Asia, Europe and Latin America,” said Basu. “With the U.S. dollar likely to get stronger over the next few months as domestic interest rates begin to rise, there is little likelihood of significant increases in construction input prices over the next six to nine months. Overall producer prices managed to increase 0.5 percent on a monthly basis, the first increase since June 2014. This reading serves to increase the likelihood that the Federal Reserve will begin to increase short-term interest rates later this year.”

Only two of the key materials prices increased in March.

  • Fabricated structural metal product prices inched 0.4 percent higher for the month and have expanded 1.3 percent on a year-over-year basis.
  • Natural gas prices expanded 1.5 percent in March, but are down 45.3 percent from the same time one year ago.

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

  • Prices for plumbing fixtures fell 0.3 percent in March but are up 2.5 percent on a year-over-year basis.
  • Prices for prepared asphalt, tar roofing, and siding fell 0.4 percent for the month and are down 0.2 percent on a year-ago basis.
  • Iron and steel prices fell 2.5 percent in March and are down 11.5 percent from the same time last year.
  • Steel mill products prices fell 1.9 percent for the month and are 4.8 percent lower than one year ago.
  • Softwood lumber prices fell 4.1 percent and are 7.4 percent lower than one year ago.
  • Nonferrous wire and cable prices remained flat on a monthly basis and grew 2.5 percent on a yearly basis
  • Crude petroleum Crude energy prices fell 4 percent in March and are down 55 percent from the same time last year.
  • Crude energy materials prices fell 1.4 percent in March but are 43.7 percent lower year over year.
  • Concrete products prices remained flat in March and are up 4.1 percent on a yearly basis.

To view the previous PPI report, click here

ABC Reports: Construction Materials Prices Dip in December

CEU2“The U.S. economy has performed handsomely over the past nine months, according to most metrics, and conventional wisdom suggests that it can continue to expand at or above trend rates of growth.”—ABC Chief Economist Anirban Basu

PPI December 20142Construction input prices dipped 1.4 percent during the final month of 2014 and are down nearly 1 percent on a year-over-year basis, according to the Jan. 15 producer price index release from the U.S. Department of Labor. Inputs to nonresidential construction fell even farther, down 1.7 percent for the month and 1.9 percent year over year. December’s report marks the sharpest decline in input prices since late 2008 during the global financial crisis and the fifth consecutive month construction materials prices have failed to rise.

“Without question, financial markets have been unnerved by the recent declines in oil, copper and other commodity prices, although that jitteriness does not necessarily imply a serious economic problem in America,” said Associated Builders and Contractors Chief Economist Anirban Basu. “The fact is the U.S. economy has performed handsomely over the past nine months, according to most metrics, and conventional wisdom suggests that it can continue to expand at or above trend rates of growth despite economic weakening in Europe, China and elsewhere. This is further evidenced by the World Bank’s recent downgrade of its forecasts for global growth in 2015 and 2016, while it upgraded its outlook for the United States.

“Overall, the view that U.S. domestic demand for construction services and most other services continues to expand is consistent with the fact that some domestically produced and consumed materials actually registered price increases last month,” said Basu. “Note that concrete prices are up by 5 percent on a year-over-year basis while natural gas prices are up by 10 percent.”

The following materials prices increased in December.

  • Prices for plumbing fixtures expanded 0.1 percent in December and are up 3.1 percent on a year-over-year basis.
  • Concrete products prices expanded 0.7 percent in December and are up 5 percent on a yearly basis.
  • Natural gas prices expanded 19.7 percent in December and are 10 percent higher than one year ago.
  • Fabricated structural metal product prices grew 0.3 for the month and have expanded 1.5 percent on a year-over-year basis.

Seven of the 11 key construction inputs did not experience price increases for the month.

  • Iron and steel prices fell 1 percent in December and are down 3.9 percent from the same time last year.
  • Nonferrous wire and cable prices fell 1.6 percent on a monthly basis and 1.5 percent on a yearly basis.
  • Prices for prepared asphalt, tar roofing, and siding fell 1 percent for the month but are up 1.9 percent on a year-ago basis.
  • Steel mill products prices fell 1.3 percent for the month but are 0.4 percent higher than one year ago.
  • Softwood lumber prices fell 1.3 percent in December but are 0.3 percent higher than one year ago.
  • Crude petroleum prices fell 18.9 percent in December and are down 37.1 percent from the same time last year.
  • Crude energy materials prices fell 4.7 percent in December but are 19.6 percent lower year-over-year.

To view the previous PPI report, click here.