Construction materials prices signal lack of demand

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Prices for construction materials edged up 0.2 percent in August, according to the September 16 producer price index (PPI) report by the U.S. Labor Department. Prices are 3.6 percent higher than one year ago, observed Associated Builders and Contractors (ABC) Chief Economist Anirban Basu.

“The data support the notion that the nation’s recovery in nonresidential construction is beginning to stall,” said Basu. “For three consecutive months, prices for softwood lumber, iron and steel have been in decline, signaling a growing lack of demand.”
Nonferrous wire and cable prices increased 1.8 percent for the month and are up 8.7 percent compared to August 2009. Prices for plumbing fixtures and fittings were up 0.6 percent in August and up 1.2 percent from the same time last year. Prices for concrete products inched up 0.5 percent for the month, but are down 1.1 percent from August 2009 levels.

Softwood lumber prices slid for a third straight month, down 3.1 percent in August. However, prices are still 6.8 percent higher on a year-over-year basis. Iron and steel prices were down 1.5 percent in August, the third straight monthly price decrease. But, prices are still 18.2 percent higher than they were one year ago. Steel mill product prices were down 3.9 in August, but were still up 17.1 percent from last August. Prepared asphalt, tar roofing and siding prices slipped 0.9 percent in August, but were up 8.6 percent over the last twelve months. Prices for fabricated structural metal products decreased 0.2 percent for the month, but were up 2.8 percent compared to August 2009.

Analysis

“The U.S. Department of Labor data are consistent with broader data regarding homebuilding activity in the United States, and is consistent with ABC’s construction backlog indicator which indicates that stimulus-induced momentum is beginning to wane,” Basu observed.

“The data are also consistent with the notion that inflation remains of little concern in the near-term. While it is true that finished goods prices rose 0.4 percent in August, this largely appears to be a reflection of commodity price increases from prior periods,” Basu said. “Pricing power, including for construction materials, remains weak and there is little reason to believe that prices will rise significantly in the months ahead.” Read More.

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