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Construction Materials Prices Rise in March

"With construction activity in China moving steadily ahead, as well as projects in the U.S. funded by stimulus money, ABC members should continue to anticipate construction material price increases in the months ahead." -ABC Chief Economist Anirban Basu

Prices for construction materials and supplies shot up for the fifth straight month, increasing 1.3 percent in March, according to April 22 producer price index (PPI) report by the U.S. Labor Department. Over the first quarter of 2010, construction materials prices increased by 2.6 percent. On a year-over-year basis, construction materials prices are up 4.8 percent.(See Analysis below)

Leading the increase, iron and steel prices rose 5.1 percent for the month, are up 14.1 percent for the quarter and 23 percent higher from last March. Steel mill products prices are up 3.4 percent for the month, 10.3 percent higher for the quarter and increased 11.3 percent year-over-year. Prices for nonferrous wire and cable also grew substantially, up 4.2 percent for the month, up 1.7 percent for the quarter and 29 percent higher from the same time last year. Softwood lumber prices increased 2.4 percent in March, are up 10.7 percent in the first quarter, and up 24.2 percent from March 2009. Prices for prepared asphalt, tar roofing and siding rose 0.8 percent for the month, but are down 1.6 percent for the quarter and 4.4 percent lower since last March. Prices for concrete products inched up 0.1 percent for the month, but are down 1.1 percent for the quarter, and down 2.0 percent from the same time last year.

Fabricated structural metal products prices remained flat for the month but grew 1.1 percent in the first quarter while staying 3.9 percent below March 2009 prices. Prices for plumbing fixtures have mildly fluctuated as they were down 0.1 percent for March, 0.4 percent lower in the first quarter, but up 0.7 percent from last March.

Overall, the nation's wholesale prices increased 0.7 percent in March, 1.5 percent in the first quarter and 6.1 percent over the last 12 months. Crude energy materials prices increased 1.3 percent in March as crude petroleum prices jumped 12.1 percent. Over the first quarter, crude energy materials prices rose 10.8 percent. However, it was the jump in food prices - up 2.4 percent - that sent the index higher.

Analysis
"Construction materials prices continue to gather upward momentum as various commodities prices rise, and the global economy continues to heal," said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. "With construction activity in China moving steadily ahead, as well as projects in the U.S. funded by stimulus money, ABC members should continue to anticipate construction material price increases in the months ahead.

"However, there is a scenario emerging that could upset these expectations. With the European economy bottled up by volcanic ash from Iceland, there may be some slowing in economic momentum across the region," Basu said. "All things being equal, a slowdown in Europe's construction activity could suppress construction materials prices.

"More importantly, if the European economic recovery is interrupted, or dampened in any way, the dollar will likely rise as a result, and that will also serve to suppress future construction price increases. Analysts are keeping a close eye to see if this scenario may develop."

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