"With the global economy beginning to tread water, the good news is materials prices are unlikely to rise significantly during the next several months." —ABC Chief Economist Anirban Basu.
Summary
Construction materials prices decreased 0.1 percent in June and are virtually unchanged for the quarter, according to the July 12 Producer Price Index report by the U.S. Labor Department.
Year over year, construction materials prices are 1.5 percent higher. Nonresidential construction materials prices were unchanged in June, rose 0.1 percent for the quarter and increased 1.2 percent during the last 12 months.
Following an 8.2 percent drop in May, softwood lumber prices fell 5.6 percent in June and are down 11.2 percent for the quarter. However, they remain 8 percent higher compared to the same time last year. Iron and steel prices decreased 0.9 percent for the month, and are down 3.4 percent for the quarter and 7.2 percent on a year-over-year basis. Steel mill prices follow a similar trend: down 0.7 percent for the month, down 1.6 percent for the quarter, and 8.1 percent lower than June 2012.
Prices for concrete products, fabricated structural metal products, and plumbing fixtures and fittings were all flat for the month. Year over year, concrete product prices are up 3 percent, fabricated structural metal product prices are down 0.8 percent, and plumbing fixtures and fitting prices are up 1 percent.
Crude energy materials prices kicked off the summer with a 0.3 percent increase in June. They increased 9.2 percent for the quarter and are up 21.5 percent from one year ago. Nonferrous wire and cable price rose 0.4 percent for the month, but were down 3.9 percent overall for the quarter and are down 2.1 percent during the last 12 months. Prices for prepared asphalt, tar roofing and siding rose 1.7 percent in June, increased 5.5 percent in the second quarter, and are 3 percent higher than the same time last year.
Overall, the nation’s wholesale goods prices increased 0.8 percent in June, rose 0.6 percent during the second quarter, and are 2.5 percent higher than one year ago.
Analysis
"Today’s headline number for construction materials prices indicates little movement,” said Associated Builders and Contractors Chief Economist Anirban Basu. “But, when viewed as individual components on a monthly or quarterly perspective, there is evidence of volatility.
"This volatility has been most apparent with softwood lumber, a category in which prices fell 5.6 percent in a single month,” Basu said. “The drop is likely attributable to an increase in softwood lumber production as opposed to a decline in demand.
"Price volatility also has been apparent in recent months in crude energy categories, iron and steel, and in prepared asphalt,” added Basu.
"With the global economy beginning to tread water, the good news is materials prices are unlikely to rise significantly during the next several months,” Basu said. “However, even as global economic growth slows, equity and certain other asset prices have been on the rise due in large measure to accommodative monetary policy.
"It is always possible that investors will begin to shift greater focus toward commodities going forward, which could drive materials prices higher even in the absence of accelerating global economic growth or significant rebound in America’s nonresidential construction industry,” said Basu.