"While the slow growth of the U.S. economy, and certain parts of the global economy, are not showing signs of volatility, unsettled policy environments remain a major variable, and contractors should anticipate fluctuation in construction materials prices in 2011." —ABC Chief Economist Anirban Basu.
Construction materials prices were down slightly in September falling 0.1 percent, according to the October 14 producer price index (PPI) report by the U.S. Labor Department. Prices were also down 0.1 percent for the quarter, but up 3.8 percent from the same time last year. (See Analysis below)
Leading the declines, prices for prepared asphalt, tar roofing, and siding fell 1.9 percent in September – the second monthly decrease – but were up 1 percent for the quarter and 2.4 percent higher over the last twelve months. Softwood lumber prices decreased 1.3 percent for the month and 7.5 percent for the quarter, but were up 4.7 percent on a year-over-year basis. Prices for fabricated structural metal products edged down 0.1 percent for the month and are down 0.3 percent for the quarter. However, over the past twelve months, prices for fabricated structural metal products were up 2.8 percent. Nonferrous wire and cable prices slipped 0.7 percent in September but were 0.3 percent higher for the quarter and up 7.3 percent from September 2009.
In contrast, iron and steel prices jumped 2 percent in September, the first monthly increase since May. Iron and steel prices were down 1.8 percent for the quarter, but up 16.5 percent from the same time last year. Steel mill product prices were up 1.2 percent for the month, down 4.1 percent for the quarter, and up 13.8 percent year-over-year. Prices for plumbing fixtures and fittings inched up 0.1 percent in September, up 0.9 percent for the quarter and 1.4 percent higher over the past twelve months. Concrete product prices were unchanged for the month and up just 0.3 percent in the third quarter. Still, concrete product prices are down 0.8 percent from September 2009.
Crude energy prices dipped 8.8 percent in September due to a 19.7 percent drop in natural gas prices. For the quarter, crude energy prices were down 4.2 percent, but were up 14.4 percent compared to September 2009. Overall, wholesale goods prices increased 0.4 percent in September and are 4 percent higher from a year ago.
“This month’s producer price index data contains a number of contradictory elements,” said Associated Builders and Contractors Chief Economist Anirban Basu. “On one hand, the weakness of the dollar and the impact on certain commodity prices is becoming increasingly apparent. Among the most noteworthy increases was the jump in iron and steel prices, which were up 2 percent for the month. This represented the first increase since May.
“Finished goods prices also rose, up 0.4 percent for the month, and 4 percent from a year ago. However, natural gas prices tumbled 19.7 percent last month. The ongoing weakness in natural gas prices remains a bit of a mystery given the general increase in energy and other commodity prices in recent months,” said Basu.
“All of this is a bit unsettling for contractors looking for price stability. While construction materials prices were down slightly in September, a deeper look into the data reveals significant volatility in prices. This volatility may continue as both U.S. monetary and fiscal policies remain unsettled and as investors seek to avoid assets that would fluctuate due to the value of the dollar,” Basu said.
“While the slow growth of the U.S. economy, and certain parts of the global economy, are not showing signs of volatility, unsettled policy environments remain a major variable, and contractors should anticipate fluctuation in construction materials prices in 2011."
To view the previous producer price index report, click HERE