Construction materials prices fell 0.2% in October 2007, with the index now back to the May level. The significant price declines in October were mainly for residential materials, including gypsum products (-4.7%), softwood lumber (-4.4%), softwood plywood (-3.9%), vitreous plumbing fixtures (-5.3%), brick (-0.7%) and engineered wood products (-0.5%). The only significant month to month price increases were for nonferrous pipe (9.9%), diesel fuel (1.4%) and asphalt roofing (0.9%).

The figures in the accompanying table are based on the Producer Price Index series published by the U.S. Bureau of Labor Statistics.

Falling U.S. Dollar and Rising Crude Oil Prices
Prices of materials manufactured from commodities priced in world markets were on balance unchanged. The immediate shock of declining demand and rising inventory in the U.S. offset the rapid decline in value of the U.S. dollar and rising crude oil prices, but is unlikely to continue doing so. This includes steel, plastics, aluminum and concrete.

The materials price index is 3.7% higher than a year ago, after rising nearly 13% in the previous two years. The year-to-year change is 2.1% for single-family construction, 4.5% for non-residential buildings and 7.6% for highways, where the dominant materials -cement, asphalt and steel — are all priced in supply-constrained world markets.

Slowly slipping materials demand in the U.S. will restrain materials price increases into the winter, but the falling U.S. dollar and strong growth in world commodity demand will dominate pricing. Reed Construction Data expects about at least a 4% inflation trend from next spring through 2009.

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