The construction materials price index fell 0.4% in September to 8.4% below the index value last September. Nonetheless, the price trend ahead is up. The September drop was the result of a temporary plunge in energy prices which have already risen sharply since the September survey week. Diesel fuel prices fell 8.5% in September from August and asphalt (at the refinery) declined 4.7%.

Prices for domestic and imported materials are now headed in the opposite direction. Prices are generally declining for materials priced in the depressed domestic market but prices are generally rising for materials priced in international markets. Prices are declining slowly for manufactured and assembled equipment where factory cost are very significant to raw commodity cost. Prices are also declining for domestic market commodities, such as gypsum, own 1.25 in September, cement, down 1.4% in September and softwood lumber, down 2.4% in September.

By contrast, metals prices, set in international markets, are rising. The September price gains were 8.2% for nonferrous pipe and tube, 0.8% for aluminum and 0.3% for structural steel. Scrap metal prices continue to rise assuring more metal prices rises soon ahead.The divergence between domestic and international price trends will increase in the next few months. Foreign commodity demand is raising rapidly, metal inventories are declining and the $US dollar continues to fall, raising the price of imports.

Monthly price reports are as likely to be up as down in to the early winter, largely depending on short term oil price changes. Then a firmer rising trend is expected when domestic price weakest ends with a pickup in total construction spending 3-5 months ahead.

The price report also includes some evidence that falling contractor margins and cuts in labor costs not captured in the official wage statistics are causing an abrupt drop in total construction costs. Bids for stimulus funded projects also suggest the same trend. Experimental indexes for the total cost of a “standard” warehouse, school and office declined 0.8-2.0% in September to barely above a year ago. Discounted margins and labor rates will continue well into next year in the depressed market no matter how international factors change materials costs.