Construction Materials Prices Fall Nearly 1% in November

Construction materials prices have fallen in five of the past six months but remain 0.6% higher on a year-over-year basis

'The deflation happening now in an array of commodities should be viewed positively — both from the perspective of the broader economy and for nonresidential construction,' said Associated Builders and Contractors Chief Economist Anirban Basu.
"The deflation happening now in an array of commodities should be viewed positively — both from the perspective of the broader economy and for nonresidential construction," said Associated Builders and Contractors Chief Economist Anirban Basu.
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Construction input prices fell again in November, down 0.8 percent for the month, according to the December 12 producer price index (PPI) release by the Department of Labor. Prices have fallen in five of the past six months but still are 0.6 percent higher on a year-over-year basis. Inputs to nonresidential construction fell 1.1 percent and are unchanged from the same time last year.

"Although there are times when deflation can be a reflection of declining demand for goods and services, the deflation happening now in an array of commodities should be viewed positively — both from the perspective of the broader economy and for nonresidential construction," said Associated Builders and Contractors Chief Economist Anirban Basu.

"A confluence of factors have combined to hammer away at key commodity prices in recent weeks, including a stronger U.S. dollar, evidence of growing financial difficulties in China, ongoing economic weakness in Europe, and softening emerging world economies in Russia and Brazil," said Basu. "At the same time, U.S. production of certain key commodities continues to expand, including oil and natural gas. As a result, construction materials prices are now in retreat. These factors imply that materials prices are unlikely to surge higher in early 2015.

"The domestic economy continues to benefit from the falling input prices," said Basu. "Gasoline prices below the $3 mark in all 48 contiguous states has bolstered consumer confidence and the declining input prices will improve contractor margins and push ahead many construction projects that would otherwise be stalled."

Crude energy materials prices fell 3.7 percent in November and are 11.1 percent lower than one year ago. Natural gas prices fell by 7.7 percent for the month and are unchanged on a year-over-year basis. On a monthly basis, natural gas prices have now fallen in eight of the previous nine months; however, on a yearly basis, natural gas prices have risen every month for the past two years. Overall, the nation's final demand prices as measured by, the PPI, fell by 0.2 percent in November.

The following materials prices increased in November:

  • Prices for plumbing fixtures expanded 0.2 percent in November and are up 3.1 percent on a year-over-year basis.
  • Concrete products prices expanded 0.5 percent in November and are up 4.3 percent on a yearly basis.
  • Fabricated structural metal product prices grew 0.1 for the month and have expanded 1.6 percent on a year-over-year basis.
  • Prices for prepared asphalt, tar roofing and siding expanded 1.6 percent for the month and 1.9 percent on a year-ago basis.

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

  • Iron and steel prices fell 2 percent in November and are down 1.4 percent from the same time last year.
  • Steel mill products prices fell 0.3 percent for the month but are 2.1 percent higher than one year ago.
  • Softwood lumber prices fell 1.9 percent for the month but are 0.7 percent higher than one year ago.
  • Natural gas prices shed 7.7 percent in November and are unchanged from one year ago.
  • Crude petroleum prices fell 3.2 percent in November and are down 17.8 percent from the same time last year.
  • Crude energy materials prices fell 3.7 percent in November and are 11.1 percent lower year over year.
  • Nonferrous wire and cable prices fell 0.7 percent on a monthly basis and 0.5 percent on a yearly basis.

View the October 2014 PPI report.

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