Construction Materials Prices Jump 2 Percent in March

"Today's data comes as little surprise as a variety of commodity prices were rising throughout the month of March, including oil prices, which were up 14.8 percent. Iron and steel prices also saw solid increases, along with steel mill product prices." -ABC Chief Economist Anirban Basu.

Construction materials prices increased 2 percent in March, which is the largest monthly increase since July 2008, according to the April 14 Department of Labor Producer Price Index (PPI). Over the past three months, construction materials prices rose 4 percent and are 6.9 percent above March 2010 levels.

Steel mill product prices also saw their largest monthly increase since July 2008, climbing 5.3 percent in March. For the quarter, steel mill product prices are up 12.4 percent, and year over year they are 15.3 percent higher.

The prices of iron and steel increased 2.8 percent in March and 10.6 percent for the quarter, to reach levels 14.7 percent higher compared to last year. Prices for fabricated structural metal products saw a more modest increase of 0.8 percent in March and 2.9 percent for the quarter, and are 5.1 percent higher than March 2010. Prices for plumbing fixtures and fittings increased by 0.4 percent in March, 0.4 percent for the quarter, and 1.8 percent year over year.

In contrast, prices for prepared asphalt, tar roofing and siding slipped 0.4 percent for the month, but were 0.3 percent higher for the quarter and 0.6 percent higher than the same time last year. Softwood lumber prices increased 0.5 percent in March and 1.4 percent for the first quarter, but are still 0.8 percent lower compared to March 2010. Concrete product prices stayed level for the month and fell 1 percent for the quarter, making them 0.7 percent lower than one year ago.

Crude energy prices fell 0.4 percent in March, but were up 2.4 percent for the quarter and 6.6 percent year over year. The 11.7 percent monthly decline in natural gas prices helped counter the 5.7 percent monthly increase in crude petroleum prices. Wholesale finished goods prices finished the month 0.7 percent higher, and were up 3.1 percent for the quarter and 5.7 percent compared to March 2010.

"Over the past nine months, the value of the U.S. dollar has slipped 8.3 percent, which tends to push commodity prices higher. Today's data comes as little surprise as a variety of commodity prices were rising throughout the month of March, including oil prices, which were up 14.8 percent. Iron and steel prices also saw solid increases, along with steel mill product prices.

"But there is more at hand than the value of the U.S. dollar. The global economy continues to expand at an above-average rate and actual and potential oil supply interruptions in Libya and Nigeria have also helped to motivate price increases in energy-related commodities.

"However, in the last few days, many commodity prices have been falling. This is possibly a result of investors believing that these commodity prices have reached artificially high levels -- levels associated with a drastic downward shift in the demand curve. Many economists continue to believe that oil prices will eventually settle into a more comfortable range of $85-$95 per barrel, although that may not happen until after the summer. Prices of other commodities are likely to follow suit, which would help support the eventual recovery in the U.S. private nonresidential construction industry."

To view the previous producer price index report, click here.

To view the current report on ABC's website, click here.

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