US construction materials production, including an improving trade balance for construction materials, increased 0.4% from April to July while total construction spending (after subtracting project cost increases) fell 1.5-2.0%.  Construction materials exports are about 20% above a year ago while imports have declined slightly.

Materials production is not expected to change much through the end of the year.  By yearend, production will be slightly higher for largely residential materials and slightly lower for largely nonresidential materials. Domestic demand for materials will slip slightly lower as total construction spending continues to ebb lower but an improving trade balance will approximately offset this.  Materials production will be up 0.6% in 2008 after a 6.5% drop during 2007-08.

The consequence for materials buyers is adequate supplies and continued price weakness into 2010 although distress prices will be less common beginning later this later.  Note that for many materials small price changes due to the changing demand-supply balance will continue to overwhelmed by much larger changes in raw commodity costs.

Overall, materials production is nearly 8% below the early 2006 peak level. Less than 20% of the 209-08 reduction in materials production volume will be recovered by the end of next year.

Materials producers are getting the same export boost that is restraining production declines for all US manufacturers. The boost comes from the four year, 25% rise in the purchasing power of other currencies in the US.  Although $US dollar depreciation ended last April has since reversed about 4%, there is about a three quarter time lag between changes in exchange rates and the resulting changes in international sourcing.  The trade boost for US manufacturers will ebb but will persist into 2009.

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