Construction Materials Prices Fail to Rise for Fifth Consecutive Month

'The deflation being observed presently will help widen contractor margins and, in some cases, increase the likelihood construction projects will move ahead'

Inputs to construction industries were down 0.9% for the month but expanded 1% on a year-over-year basis; inputs to nonresidential construction fell 1.1% for the month but are 0.5% higher than at the same time last year.
Inputs to construction industries were down 0.9% for the month but expanded 1% on a year-over-year basis; inputs to nonresidential construction fell 1.1% for the month but are 0.5% higher than at the same time last year.
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October marked the fifth consecutive month during which construction input prices have failed to rise. Inputs to construction industries were down 0.9 percent for the month but expanded 1 percent on a year-over-year basis, according to a November 17 producer price index (PPI) release from the U.S. Department of Labor. Inputs to nonresidential construction fell 1.1 percent for the month but are 0.5 percent higher than at the same time last year.

"This deflation in an array of commodities should be viewed positively for the economy as well as for nonresidential construction," said Associated Builders and Contractors Chief Economist Anirban Basu. "Deflation can be a reflection of declining demand for goods and services, including for construction. However, the deflation being observed presently will help widen contractor margins and, in some cases, increase the likelihood construction projects will move ahead."

Crude energy materials prices fell 5.5 percent in October and are 11.4 percent lower than one year ago. Natural gas prices fell by 1.2 percent in October and have now fallen in seven of the past eight months on a monthly basis. On a year-over year basis, however, natural gas prices expanded for the 22nd consecutive month. Overall, the nation's final demand prices as measured by the PPI expanded by 0.2 percent in October.

"While weakness in the global economy has helped to produce declining oil, copper, and other prices, U.S. economic growth has remained firm," said Basu. "The result is contractors, along with the broader economy, are benefiting from cheaper input prices. A strong U.S. dollar has certainly helped and there is little indication that the U.S. dollar is poised to make a meaningful move in the other direction."

The following materials prices increased in October:

  • Prices for plumbing fixtures expanded 0.1 percent in October and are up 3 percent on a year-over-year basis.
  • Concrete products prices expanded 0.3 percent in October and are up 3.8 percent on a yearly basis.
  • Nonferrous wire and cable prices grew 0.1 percent on a monthly basis and 0.2 percent on a yearly basis.
  • Prices for prepared asphalt, tar roofing, and siding expanded 8 percent for the month but are down 2 percent on a year-ago basis.

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

 

  • Fabricated structural metal product prices remained flat for the month and have expanded 1.8 percent on a year-over-year basis.
  • Iron and steel prices fell 1.7 percent in October but are up 2.4 percent from the same time last year.
  • Steel mill products prices fell 0.4 percent for the month but are 3.5 percent higher than one year ago.
  • Softwood lumber prices fell 2.2 percent on a monthly basis but are 5.3 percent higher than one year ago.
  • Natural gas prices shed 1.2 percent in October but are 8.8 percent higher than one year ago.
  • Crude petroleum prices fell 9.8 percent in October and are down 21.6 percent from the same time last year.
  • Crude energy materials prices fell 5.5 percent in October and are 11.4 percent lower year over year.

View the September PPI report.

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