The construction materials production index fell 2.8% in March, continuing to generally track overall construction spending plus or minus changes in materials prices. Materials production has declined 27% since peaking in early 2006. A further 4% drop is expected by next spring. The turnaround in the materials production index will lag the turnaround in jobsite construction spending by 4-6 months, about equally due to rising materials costs and to several months needed to absorb surplus inventories when materials demand again is expanding.

Ignore the obvious gap between the two times series that opened about a year ago. It is largely due to downward bias in the production index because it is based on 2006 material usage weights and thus over-weights the shrunken lumber industry and assigns too much of the now collapsing steel industry to construction.

Materials Production Tracks Construction Spending

Source: Federal Reserve Board; Census Bureau