Associated Builders and Contractors Inc.

Construction Materials Prices Increase in June 2014

Overall construction materials prices increased by 0.1 percent in June and are up 1.9 percent year over year, according to the July 16 producer price index release by the U.S. Department of Labor. Nonresidential construction materials prices also expanded 0.1 percent for the month and are 1.4 percent higher than one year ago.

“Prices for inputs to construction industries have now risen in five of the year’s first six months,” said Associated Builders and Contractors Chief Economist Anirban Basu. "This marks a significant departure from the previous year’s remarkable stability. Recent monthly gains have been modest—0.1 percent in June and unchanged in May; however, the surprisingly upbeat economic news from China (Chinese GDP grew 7.5 percent in the second quarter), along with a slew of large construction starts in specific regions of the U.S., suggest that prices may continue to rise—albeit modestly— through the second half of 2014.

“A number of international conflicts could apply upward pressure on material prices,” said Basu. “The Middle East is as turbulent as ever and as construction volume increases, any supply-related disruptions could lead to a period of meaningful price inflation.

“The effects of the metal financing scandal at Qingdao port in China—the world’s seventh busiest port— are also yet to be seen,” said Basu. “In May, Chinese authorities launched an investigation into Decheng Mining, a private metals trading firm that used fraudulent warehouse receipts to obtain several loans against a single cargo of metal. As more firms take legal actual against Decheng, we simply do not know the extent to which the financing fraud will impact the metals market."

Crude energy materials prices expanded 1.2 percent in June and are 6 percent higher than one year ago. Natural gas prices fell by 1.5 percent in June and have now fallen in three of the past four months. Overall, the nation’s wholesale goods prices expanded by 0.4 percent in June and are up 1.9 percent year over year.

The following materials prices increased in June:

  • Crude petroleum prices increased 3.2 percent in June and are up 5.6 percent from June 2013
  • Crude energy materials prices expanded by 1.2 percent in June and are 6.0 percent higher year-over-year
  • Softwood lumber prices expanded 2.3 percent and are 7.3 percent higher than one year ago
  • Prices for plumbing fixtures expanded 0.4 percent in June and are up 2.4 percent on a year-over-year basis
  • Concrete products prices expanded 0.4 percent in June and are up 3.5 percent on a yearly basis
  • Steel mill products prices rose 0.5 percent for the month and are 4.1 percent higher than one year ago

Five of the 11 key construction inputs did not experience price increases for the month.

  • Prices for prepared asphalt, tar roofing, and siding declined 1 percent for the month and are down 6.6 percent on a year-over-year basis
  • Fabricated structural metal product prices remained flat for the month but have increased 1.3 percent on a year-over-year basis
  • Iron and steel prices declined 0.2 percent in June but are up 4.6 percent from the same time last year
  • Nonferrous wire and cable prices remained flat on a monthly basis but are down 1.6 percent from June 2013
  • Natural gas prices shed 1.5 percent in June but are 12.9 percent higher than one year ago.

View the May PPI report.

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