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Construction Materials Price Index Rises 0.1% in February

0 1061 Market Intelligence

Construction materials price inflation continues to increase faster than overall inflation although inflation weakened in both indexes in February. The economy-wide Producer Price Index fell 0.6%, almost entirely due to a drop in oil prices, says Reed Construction Data chief economist Jim Haughey.

Construction materials price inflation continues to increase faster than overall inflation although inflation weakened in both indexes in February. The economy-wide Producer Price Index fell 0.6%, almost entirely due to a drop in oil prices. The materials price index rose 0.1. A 10% drop in diesel prices and an 8% fall in non-ferrous metal prices, the only significant price declines in February, almost completely offset sharp rises in asphalt, lumber, and plywood prices and smaller increases in most metal and concrete product prices. The drop in diesel prices will be reversed in March since diesel prices have already increased $0.18/gal. between the February and March price survey weeks.

The materials price index has increased 1.5% in the last three months. This is about a 6% annual pace which is the expected trend well into 2011.

The significant prices increases in February were 10.2% for asphalt, 7.5% for softwood lumber, 5.6% for plastic resin and 5.1% for softwood plywood. More asphalt price increases have been announced since the February price survey week. Lumber prices have been steady since early February. The current price level is consistent with balanced market demand and supply. Prices are likely to cycle about the current level this year with no sustained move in either direction. Similarly, the February rise in plastic resin prices is a periodic adjustment to higher oil prices and does not signal continuing price rises in the coming months.

Some small price increases in February could be the beginning of sustained price increases over many months. Gypsum product prices were up 0.2% but double-digit price rises were announced by several suppliers for the next few months. Construction equipment prices fell 0.2% in February and are 0.4% below a year ago. However, equipment rental rates jumped an outsized 1.5%. This may signal that rental houses see enough demand increase or cuts in their inventory to begin regaining the margins lost over the last few years.

The subdued inflation across the whole economy gives the Federal Reserve Board more time to keep interest rates low before they begin to withdraw the emergency liquidity pumped into the economy in late 2008. This is the most positive news in the February price report.

US Construction-Related Price Indexes – February 2010

  Percent Change versus...
  3 years
ago
year
ago
3 months
ago
previous
month
Construction Commodities  
Dimension Stone 12.8 8.0 2.3 2.9
Cement -1.3 -3.2 -0.4 0.1
Asphalt Paving Mixtures and Blocks 62.7 49.8 8.6 10.2
Construction Sand, Gravel & Crushed Stone 14.7 1.0 1.3 0.3
Softwood Plywood -1.6 4.3 4.7 5.1
Hardwood Lumber -7.7 3.6 3.1 1.5
Softwood Lumber -5.5 17.0 12.3 7.5
Other Commodities  
Industrial Natural Gas -12.2 -8.2 3.2 -0.9
Plastic Resins & Materials 13.4 9.7 7.5 5.6
Insulation Materials -1.1 1.2 3.4 2.6
Iron & Steel Scrap 27.4 69.2 36.6 3.4
Iron Ore 9.5 -8.8 -0.5 0.1
Copper Ores 11.6 82.8 -4.9 -2.8
Copper Base Scrap 19.3 103.3 6.9 -6.8
Manufactured Materials  
Gypsum Products -22.4 -10.3 -2.3 0.2
Diesel Fuel 6.9 42.0 -4.2 -9.5
Asphalt Roofing 51.2 -5.9 2.6 -0.5
Paint 20.6 -0.4 0.1 0.0
Plastic Construction Products 5.7 1.0 1.5 1.5
Vitreous Plumbing Fixtures -2.0 2.4 0.1 0.1
Ceramic Tile 2.2 -3.2 -1.0 -1.3
Flat Glass -2.0 -4.5 -1.9 0.4
Fabricated Building Steel 1.8 -6.8 -0.3 0.1
Hot rolled bars, plates & structural shapes 3.8 -0.7 8.1 4.1
Extruded Aluminum rod, bar and other shapes -12.4 12.0 5.3 1.1
Architectural Metalwork 16.5 -2.7 1.3 0.3
Metal Plumbing Fixtures 5.3 1.5 0.8 0.1
Builders/' Hardware 11.6 -1.0 -0.4 0.5
Sheet Metal Products 2.9 -3.1 0.2 0.2
Steel Pipe and Tube 10.3 -6.9 6.0 2.2
Nonferrous Pipe and Tube 21.5 49.2 7.0 -8.3
Building Brick -1.7 -1.6 -0.2 -1.0
Ready Mix Concrete 3.5 -3.5 0.0 0.2
Concrete Block & Brick 6.2 -1.0 0.0 0.1
Prestressed Concrete -6.3 -7.4 3.4 1.8
Precast Concrete Products 10.2 1.2 0.3 0.4
Concrete Pipe 8.4 -5.2 -2.8 0.7
Wood Kitchen Cabinets 4.0 -0.1 -0.5 0.2
Millwork (window,door, cabinet) 2.5 -0.9 -0.7 0.1
Engineered Wood Products -6.5 0.3 0.7 0.8
Laminated Plastics 3.0 -1.6 -0.3 0.0
Assembled Equipment  
Hand and Edge tools 9.0 0.1 0.0 0.0
Power Hand Tools 2.6 -0.7 0.0 -0.1
Appliances 4.7 -1.8 -0.5 -0.1
Furnaces 3.8 0.0 0.8 0.3
Construction Machinery 6.7 -0.4 -0.1 -0.2
Construction Machinery Rental
   (incl. oilfield equip.)
-0.3 0.1 0.9 1.5
Trucks over 14,000 Ibs. GVW 11.1 2.1 0.2 0.1
Metal Doors, Sash and Trim 6.3 0.2 1.3 1.2
Summary  
Construction Materials (commodity level) 5.9 0.9 1.6 1.6
Inputs to Construction Industries 9.0 2.7 1.5 0.1
Inputs to NR Construction 14.6 7.6 3.1 0.1
Inputs to SF Construction 7.4 1.3 2.5 0.3
Inputs to MF Construction 6.6 1.5 1.5 0.3
Inputs to Highway & Street Const. 14.3 5.4 1.2 -0.4
Inputs to Other Heavy Construction
   (indexes incl. installation and overhead)
9.1 2.9 1.2 -0.4
New Warehouse Building Construction 4.9 -5.5 -0.1 -0.1
New School Construction 11.8 -1.8 0.4 -0.2
New Office Construction   -4.7 -0.5 0.1
Production Index: Construction Supplies -24.0 -4.5 -0.8 0.3
Retail Sales: Building & Equipment Supplies -18.6 -6.7 0.8 -3.7

Source: Producer Price Index, Bureau of Labor Statistics,
US Department of Labor, Federal Reserve Board, Census Bureau

by Jim Haughey

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