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Construction Materials Prices Stable
Despite Growing Energy Costs

The producer price index for construction inputs - raw materials used in construction projects, and commonly used industry essentials like diesel fuel - increased 2 percent year-over-year in July, though the index remained flat from June to July. A 21.6 percent year-over-year increase in crude energy prices was offset by declines in other categories, including softwood lumber, and nonferrous wire and cable (pictured).

Construction materials prices remained stable from June to July but are up 2.0 percent compared to July 2012, according to the latest Producer Price Index (PPI) release by the U.S. Labor Department. Nonresidential construction materials prices were down 0.1 percent for the month and are 1.8 percent higher than one year ago.

"According to [July's] Producer Price Index report, nonresidential construction materials remained well behaved, with aggregate price levels falling 0.1 percent in July and inputs to nonresidential construction increasing less than 2 percent during the past year. Input price inflation is rarely so well contained," said Associated Builders and Contractors' chief economist Anirban Basu.

Within the seemingly stable report, however, volatility lurks. Crude energy prices climbed 4 percent in July, and crude petroleum prices jumped 10.6 percent. Year over year, crude energy prices are up 21.6 percent. Prices for plumbing fixtures and fittings increased 2.1 percent from June and are up 3.1 percent annually, and prices for prepared asphalt, tar roofing and siding rose 2 percent for the month and are 4.7 percent higher than the same time last year. Prices for concrete products were 0.5 percent higher for the month and are up 3.3 percent compared to last year.

"For contractors, the implication is that not all materials prices are well behaved," Basu said.

Key construction inputs that did not experience price increases for the month include fabricated structural metal products, which were unchanged and have been flat on a year-over-year basis.

Softwood lumber prices slipped for the third straight month, down 0.5 percent in July, but are still 9.9 percent higher than one year ago. Nonferrous wire and cable prices fell 1.1 percent for the month and are down 3.9 percent from July 2012.

"Prices fell in certain categories, including softwood lumber and nonferrous wire and cable. Those declines help explain the flat overall PPI number for the month, but do not change the fact that materials prices remain more volatile than they might appear at first glance."

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October 17, 2019, 9:09 am PDT

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