Construction Materials Prices Decreased Slightly in October 2012

Producer Price Index report reflects volatility likely to come for construction materials prices

Construction materials prices saw a slight decrease of 0.4% in October 2012 after a slight increase of 0.9% in September 2012.
Construction materials prices saw a slight decrease of 0.4% in October 2012 after a slight increase of 0.9% in September 2012.
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The nation’s construction materials prices fell for the first time in three months, slipping 0.4 percent in October, according to the U.S. Labor Department’s producer price index (PPI). However, materials prices remain 2 percent higher than one year ago. Nonresidential construction materials prices decreased 0.5 percent for the month but were 1.8 percent higher on a year-over-year basis.

  • Iron and steel prices fell 3.8 percent in October and are 11.8 percent lower than the same time last year
  • Steel mill products prices were down 1.9 percent and are 8.5 percent lower than one year ago
  • Softwood lumber prices decreased 2.7 percent but are up 6.7 percent compared to October 2011
  • Prices for fabricated structural metal products were unchanged for the month and have edged 0.6 percent higher during the last twelve months

A number of construction materials experienced price increases in October.

  • Nonferrous wire and cable increased 1.4 percent for the month and are 2.6 percent higher year over year
  • Prepared asphalt, tar roofing and siding rose 0.7 percent in October but are 1.9 percent lower from October 2011
  • Plumbing fixtures and fitting prices increased 0.4 percent for the month and are up 1.8 percent than one year ago
  • Prices for concrete products inched up 0.2 percent on a monthly basis and are 2.6 percent more expensive on a year-over-year basis
  • Crude energy materials prices increased 1.3 percent in October, driven primarily by a 9.5 percent gain in natural gas prices. Year over year, crude energy materials prices are down 4.8 percent.

Overall, the nation’s wholesale goods prices slipped 0.2 percent in October but are 2.3 percent higher than the same time last year.

“Given the continuing turmoil in the U.S. financial markets, the instability in Europe and the shaky global economy in general, commodity and construction input prices are likely to become more volatile,” said Associated Builders and Contractors Chief Economist Anirban Basu. “This does not mean commodity prices will necessarily rise every month but simply that prices are likely to jump around more than they have in recent months.

“October’s PPI report reflects the volatility likely to come,” Basu said. “Not only did construction materials prices dip 0.4 percent for the month but certain key categories experienced rather sharp declines, including iron and steel-related construction products.

“In contrast, natural gas prices rose significantly in October,” said Basu. “It is not clear what impact Hurricane Sandy may have had on this result, but it is unlikely that natural gas prices will surge higher during the months ahead given subdued forecasts for economic expansion in the United States and in much of the world.

“The best scenario for contractors would be predictable materials prices in 2013,” Basu said. “Stable materials prices allow developers and their financiers to be more comfortable with project starts, which generate more activity for general contractors and subcontractors.

“However, next year is shaping up to be a very challenging time given the elevated levels of policy and economic uncertainty,” said Basu. “That uncertainty probably will translate into greater financial market volatility, which in turn will impact the stability of commodity and construction materials prices as investors shift between asset categories.”

View the September Producer Price Index report.