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Construction Materials Prices Dip 0.5 Percent in May

"Given the ongoing slew of bad economic news from around much of the world, materials prices are likely to remain stable over the months ahead." —ABC Chief Economist Anirban Basu.

Reflecting a softness in demand, the prices for construction materials dipped 0.5 percent in May, according to the June 13 U.S. Labor Department’s Producer Price Index (PPI) report. However, construction materials prices are 1 percent higher from a year ago. Similarly, nonresidential construction materials prices fell 0.6 percent last month, but are up 0.6 percent compared to May 2011.

For specific commodities, nonferrous wire and cable prices moved down 1.9 percent last month and remained 4.6 percent lower than one year ago. Steel mill prices declined 0.9 percent in May and are down 3 percent from the same time last year. Likewise, iron and steel prices fell 0.9 percent in May and are down 2.3 percent year over year. Prices for concrete products decreased 0.5 percent for the month on a seasonally adjusted basis, but are up 1.3 percent compared to a year ago. Fabricated structural metal products prices fell 0.4 percent in May, but remain 1.7 percent higher year over year.

In contrast, softwood lumber prices rose 5.8 percent in May, and are up 10.5 percent from that same time last year. Prices of prepared asphalt, tar roofing and siding also rose 1.8 percent last month, but are down 4.5 percent from May 2011. Plumbing fixtures and fittings prices remained unchanged in May after a slight fall in April, but are up 1.8 percent compared to a year ago.

Crude energy materials prices declined 5 percent in May, a reflection of the 7.6 percent decrease in crude petroleum prices. Year over year, crude energy materials prices are down 17.9 percent. Overall, the nation’s wholesale goods prices declined 1 percent for the month on a seasonally adjusted basis and are 0.8 percent higher from one year ago.

Analysis

“Construction materials prices continued to be well-behaved in the midst of a coordinated global economic slowdown,” said Associated Builders and Contractors Chief Economist Anirban Basu. “The economies of a number of emerging nations, including China, India and Brazil, have slowed in recent months, due in part to ongoing economic issues in Europe.

“With the U.S. economy growing less than 2 percent, and with many other parts of the world experiencing lackluster growth, demand for productive input, including construction materials, remains soft,” Basu said.

“This weakness in demand is especially apparent in the oil and crude petroleum category, along with iron and steel mill products, which fell nearly a full percent,” said Basu. “Given the ongoing slew of bad economic news from around much of the world, materials prices are likely to remain stable over the months ahead.

“That is not to suggest that price spikes are not possible,” Basu said. “There are times when investors, seeking to reduce exposure to equities and corporate bonds, pour money into commodities, thereby driving construction materials prices higher even in the midst of economic slowing.

“Geopolitical events might also induce oil and other commodity prices higher during the months ahead,” said Basu. “However, based purely on economic factors, demand for construction materials is unlikely to recover anytime soon, which may translate into additional price declines in the near future.”

To view the previous Producer Price Index report, click here.

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