Construction Forecasts

News & Analysis

Construction Materials Price Index Rises 1.4% in April

05/17/2011 by Jim Haughey, RCD Chief Economist

The surge in construction materials prices continues to ebb with the monthly gain in April falling to 1.4% from 2.0% a month earlier. World commodity prices have dropped sharply since the price survey week (2nd week of April) so monthly materials price inflation is expected to weaken further in the next few months.

The significant price increases in April were diesel fuel (5.7%), nonferrous pipe and tube (3.5%), structural steel (3.2%), softwood plywood (2.8%) and plastic resins (2.6%). The jump in plywood prices is unrelated to the world commodity situation and is not a sustainable trend. The metal price spikes are spillover from previous huge ore and scrap price gains. More price rises may be ahead for a few months but at a slower pace. Similarly, the diesel and plastic resin price increases come from the sharp rise in crude prices earlier in the year. Crude prices have fallen $16/bbl. since the price survey week and diesel prices have been steady at $4.10/ gal. Next months report will show diesel prices steady to slightly down although resin prices may rise slightly more.

The only significant price declines in April were a 4.9% drop in gypsum product prices, partially reversing a large periodic price rise the previous month and a 1.5% drop in softwood lumber prices in response to unexpectedly weak winter construction activity. Current futures market prices suggest that weakening lumber prices will persist for a few more months.

Overall inflation in the economy remained high with a 0.8% gain in the April Producer Price Index driven largely by energy and food prices. The price index rose 0.3% excluding energy and food to 2.1% above a year ago. The spike in energy and food prices is now boosting prices for all items in the index via freight rates, fuel surcharges and higher business operating costs. The low inflation window that the FRB has relied on for leeway to pursue aggressively easy monetary policy is now closing. The FRB is counting on the commodity price surge easing enough to permit cheap credit policies to be pursued for another 2-3 quarters before the risk of spurring inflation becomes too great. This is a close call. It may not be possible.

Construction inflation will probably dip below overall inflation in the next few months but will be back above the overall inflation pace in the second half of the year because of the high share of commodity imports in the construction material price equation. World economic growth remains close to 4.5% and the $US had resumed depreciating.

US Construction-Related Price Indexes – April 2011

  Percent Change versus...
  3 years
ago
year
ago
3 months
ago
previous
month
Construction Commodities  
Dimension Stone 11.7 2.1 -3.1 0.2
Cement -9.3 -2.9 0.8 0.7
Construction Sand, Gravel & Crushed Stone 7.9 1.7 0.2 -0.1
Softwood Plywood 3.8 -9.4 4.0 2.8
Hardwood Lumber -0.2 1.0 -0.7 -0.4
Softwood Lumber 6.1 -6.8 -0.9 -1.5
Other Commodities  
Industrial Natural Gas -27.2 1.3 -0.7 -0.5
Plastic Resins & Materials 7.6 -0.4 3.9 2.6
Insulation Materials 10.6 7.0 3.9 -0.2
Iron & Steel Scrap -7.9 7.6 -1.1 0.1
Iron Ore 5.6 8.3 0.8 0.0
Copper Ores 12.0 13.6 4.2 -3.3
Copper Base Scrap 14.0 15.5 8.2 4.5
Manufactured Materials  
Gypsum Products -4.5 -2.1 1.1 -4.9
Diesel Fuel -6.9 41.6 25.9 5.7
Asphalt Roofing 45.6 1.5 0.5 0.2
Paint 14.9 6.3 3.1 -0.1
Plastic Construction Products 8.6 2.0 2.3 0.3
Vitreous Plumbing Fixtures 7.1 0.7 0.6 0.6
Ceramic Tile -2.1 -0.5 -1.4 -0.8
Flat Glass -0.7 2.0 0.3 0.4
Fabricated Building Steel -7.3 0.5 1.4 0.1
Hot rolled bars, plates & structural shapes 2.6 12.3 8.8 3.2
Extruded Aluminum rod, bar and other shapes -8.6 9.8 4.4 0.9
Architectural Metalwork 15.7 4.3 2.7 1.9
Metal Plumbing Fixtures 4.8 1.8 0.7 0.3
Builders' Hardware 8.8 2.6 0.8 0.2
Sheet Metal Products 7.3 6.7 3.0 1.4
Steel Pipe and Tube 22.2 17.2 10.3 0.4
Nonferrous Pipe and Tube 12.1 14.7 0.6 3.5
Building Brick -3.9 -2.8 -1.3 0.2
Ready Mix Concrete 0.2 -0.3 -0.8 -0.3
Concrete Block & Brick 2.9 0.1 0.8 -0.2
Prestressed Concrete -6.8 -1.6 -2.5 1.4
Precast Concrete Products 1.5 1.9 0.7 0.8
Concrete Pipe -1.4 0.7 1.5 -0.2
Wood Kitchen Cabinets 3.9 2.7 1.9 0.1
Millwork (window, door, cabinet) 2.7 0.9 0.8 0.1
Engineered Wood Products 3.7 1.8 1.6 -0.4
Laminated Plastics 4.6 2.8 1.3 -0.1
Assembled Equipment  
Hand and Edge tools 5.5 0.4 0.0 0.0
Power Hand Tools 1.3 0.3 -0.3 0.1
Appliances 4.5 0.5 0.5 -0.1
Furnaces 3.1 0.9 2.0 -0.4
Construction Machinery 6.8 2.1 0.5 -0.1
Construction Machinery Rental (incl. oilfield equip.) -1.5 4.4 0.3 0.0
Trucks over 14,000 Ibs. GVW 10.3 2.7 -0.3 0.0
Metal Doors, Sash and Trim 8.8 4.6 2.8 0.9
Summary  
Construction Materials (commodity level) 5.8 2.3 2.8 0.6
Inputs to Construction 9.8 7.2 4.5 1.4
Inputs to Residential Construction 10.9 5.9 3.7 1.1
Inputs to Commercial Construction n/a n/a 3.9 1.3
Inputs to Industrial Construction n/a n/a 4.2 1.5
Inputs to Heavy Construction
   (indexes incl. instatlation and overhead)
n/a n/a 5.8 1.8
New Warehouse Building Construction 2.5 1.7 0.8 0.8
New School Building Construction 11.8 1.6 0.8 1.1
New Office Construction 3.2 1.6 1.1 0.8
Production Index: Construction Supplies -23.1 8.5 -0.5 -0.7
Retail Sales: Building & Equipment Supplies  -5.4 -3.7 1.6 0.1

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


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