Construction Forecasts

News & Analysis

Inflation and Unwanted Inventory Push Construction Materials Production Up in May

07/15/2011 by Jim Haughey, RCD Chief Economist

May’s 1.4% increase in construction materials production does not signal a rebound in materials demand by contractors with new work. Half of the gain was due to higher prices and rest added to already surplus inventories. The materials market is still stalled because construction activity has continued to slip slowly lower in an abruptly sluggish period of economic growth during the spring. Materials orders, despite high prices, slipped 0.6% lower in May from April. This is a more accurate reflection of market conditions. The spring economic slowdown appeared to ease slightly in June with higher — but still subpar — economic growth expected during the summer. If so, this will set off sustained but slow expansion in materials orders, production and sales in the fall when the recent buildup of surplus inventory has been absorbed.

Construction Materials

  Percent Change in…
  1 month 3 months 12 months 3 years
Production 1.4 2.7 4.0 -17.8
Prices 0.7 3.5 6.0 10.0
Orders -0.6 -0.6 2.0 -20.7
Shipments 0.4 0.9 0.0 -20.9
Unfilled Orders 0.8 2.8 12.6 -4.7
Inventory 1.3 3.7 6.4 -9.3
Inv/Sales Ratio 0.8 2.7 6.3 14.6

Sources: US Dept. of Labor, US Dept. of Commerce, Federal Reserve Board


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