"While this is good news for construction contractors because materials prices are expected to remain well-behaved, the larger view is that overall construction activity is still lagging and may continue to do so in the months ahead." —ABC Chief Economist Anirban Basu.
The nation’s construction materials prices fell by 0.6 percent in June, according to the July 13 Producer Price Index report by the U.S. Labor Department. Though the prices of construction materials are down 1 percent relative to last quarter, prices remain 0.2 percent higher than one year ago.
Iron and steel products fell 3.8 percent for the month, down 4.9 percent for the quarter and 6 percent lower from one year ago. Non-ferrous wire and cable product prices declined 2.1 percent for the month, 3.3 percent lower for the quarter and are down 7.3 percent from June 2011. Steel mill prices fell 1.3 percent from previous month, down 2 percent during the second quarter and 3.2 percent lower from the same time last year. Plumbing fixtures and fittings prices remained unchanged for the month and are down 0.7 percent during the second quarter, but are 1.5 percent higher year over year.
In contrast, softwood lumber prices rose by 1.9 percent in June, up 7.4 percent during the second quarter and 11 percent higher from one year ago. Prices of concrete products increased 0.3 percent in June, remained unchanged for the quarter and are up 1.5 percent from the same time last year. Fabricated structural metal product prices rose 0.2 percent last month as well as on a quarterly basis, and are 1.5 percent higher from June 2011.
Crude energy materials prices declined 5.1 percent in June on a seasonally adjusted basis and are 16 percent lower compared to the previous quarter. The decline in crude energy prices is due to the lower prices for crude petroleum and coal. Year-over-year, crude energy materials prices are down 20.5 percent. Overall, the nation’s wholesale good prices increased 0.1 percent in June on a seasonally adjusted basis, but decreased 1.2 percent for the quarter.
Analysis
"Today’s producer price index report, which indicates falling construction materials prices, reflects the collective impact of a number of economic forces,” said Associated Builders and Contractors Chief Economist Anirban Basu. “Much can be attributed to a coordinated global economic slowing, including a stable U.S. dollar and the decrease in demand for construction materials in much of the world.
"The economic weakness is well documented around the world,” Basu said. “For example, China’s economic expansion has slipped below 8 percent, and the rate of annualized growth in the United States during the first half of 2012 was below 2 percent.
"The elevated levels of uncertainty regarding near-term economic recovery are lingering like a dark cloud,” said Basu. “Until some substantial fraction of that uncertainty abates, lower materials prices will fail to spark renewed nonresidential construction spending recovery.
"While this is good news for construction contractors because materials prices are expected to remain well-behaved, the larger view is that overall construction activity is still lagging and may continue to do so in the months ahead,” Basu said.