"The weakening of economies in Europe, Japan and elsewhere has reduced demand for construction materials on a global basis." —ABC Chief Economist Anirban Basu.
Overall, construction materials prices inched higher in July and are up 2 percent year over year, according to the Aug. 15 producer price index (PPI) release by the U.S. Department of Labor. Nonresidential construction materials prices were flat for the month and are just 1.4 percent higher than at the same time one year ago.
"The weakening of economies in Europe, Japan and elsewhere has reduced demand for construction materials on a global basis, helping to offset the impact of geopolitical strife in commodity-rich areas," said Associated Builders and Contractors Chief Economist Anirban Basu. "Oil and other commodity prices have actually been falling in recent days as additional bad economic news emerges from Germany, France, Italy and other major economies."
Crude energy materials prices fell 6.3 percent in July and are 1.7 percent lower than one year ago. Natural gas prices fell by 5.7 percent in July and have now fallen in four of the past five months on a monthly basis. On a year-over-year basis, natural gas prices have expanded by more than 10 percent for each month of 2014. Overall, the nation’s final demand prices, as measured by the PPI, expanded by 0.1 percent in July and are up 1.7 percent year over year.
"While the harsh winter helped to lift energy prices during the initial quarter of 2014, a cool and pleasant summer has helped to usher them in the opposite direction," said Basu. "From a monetary policy perspective, the 1.7 percent year-over-year gain in overall final demand prices bodes well for those who would prefer to see the Federal Reserve continue its soft-on-inflation policymaking. During previous months, final demand price gains were in the range of 2 percent on a year-over-year basis. The July data will help to assuage inflation-related fears."
The following materials prices increased in July.
• Softwood lumber prices expanded 3.4 percent and are 9.5 percent higher than one year ago.
• Prices for plumbing fixtures expanded 0.9 percent in July and are up 2.8 percent on a year-over-year basis.
• Concrete products prices expanded 0.4 percent in July and are up 3.6 percent on a yearly basis.
• Steel mill products prices rose 0.1 percent for the month and are 3.9 percent higher than one year ago.
• Fabricated structural metal product prices grew 0.2 for the month and have expanded 1.3 percent on a year-over-year basis.
• Nonferrous wire and cable prices grew 0.6 percent on a monthly basis, but are down 0.8 percent from July 2013.
Five of the 11 key construction inputs did not experience price increases for the month.
• Prices for prepared asphalt, tar roofing, and siding declined 4.2 percent for the month and are down 9.1 percent on a year-ago basis.
• Iron and steel prices remained flat in July and are up 3.2 percent from the same time last year.
• Natural gas prices shed 5.7 percent in June but are 16.4 percent higher than one year ago.
• Crude petroleum prices fell 8 percent in July on both a monthly and a yearly basis.
• Crude energy materials prices fell 6.3 percent in July and are 1.7 percent lower year over year.
To view the previous PPI report, click HERE.