The construction materials price index fell 0.6% in February extending the decline since the September peak to 9.1%. The spike in prices earlier in 2008 has now been more than reversed. The index stands at only 0.5% higher than a year ago. The price index is expected to decline slowly for a few more months but be rising modestly again by the end of the level and rising more quickly next year, perhaps up 4-5% from the 2009 average.

February’s price drop was lead by steel products. Structural steel prices fell 2.9% with similar drops for steel pipe and builders’ hardware and a smaller decline for metal plumbing fixtures. Nonferrous price changes were missed in February. Extruded aluminum prices fell 3.2% but copper pipe and tube prices jumped 5.8% as copper ore and scrap prices both increased sharply. The countercyclical move in copper prices is supply driven and likely short term.

Lumber and plywood prices were marginally lower. Cement prices declined 1.1% after very little price decline over the past year. But this is not yet reflected in concrete products prices which generally rose slightly.

The only other significant price changes in February were an 11.3% cut in diesel fuel costs and an 8.0% drop in natural gas prices which will work its way into plastics products prices within a few months. Daily energy price monitoring suggests another 8% fall in diesel prices and a marginal drop in natural gas prices in March. Beyond March, diesel fuel prices are not expected to decline further but natural gas prices are likely to dip another 10% by mid-year.

Price trends vary widely by region depending on the level and mix of construction work in each market. Price level and trend information for more than 300 markets is available from RSMeans at www.reedconstructiondata.com/construction-costs/us/

Construction Materials Inflation – February 2009

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