June 18, 2012

U.S. construction material prices edge down in May

WASHINGTON, D.C.

The amount contractors pay for a range of key construction materials in the United States edged down 0.3 per cent in May and climbed by only 2.3 per cent from a year earlier, according to an analysis of producer price index figures released by the Associated General Contractors of America.

Meanwhile, the amount contractors charge to construct projects remained largely flat for the month and is up only between 3.1 and 4.3 per cent for the year.

“The slowdown in construction input price increases is a rare and possibly short-lived event,” said Ken Simonson, the association’s chief economist, noting that the last time prices rose so slowly from a year earlier was February 2010.

“Meanwhile, some of the price increases we are seeing for materials like gypsum and lumber reflect a strengthening new residential and commercial remodeling construction.”

Simonson noted that prices for a number of key construction materials declined between April and May. The price index for diesel fuel dropped 3.6 per cent in May and is down 0.2 per cent compared to last year. The index for copper and brass mill shapes declined 1.6 per cent for the month and 8.3 per cent since May 2011.

Likewise, aluminum mill products dropped in price for the month, by 1.9 per cent and fell 9.0 per cent from a year earlier. Meanwhile, the index for gypsum products increased by 1.2 per cent in May and 13.6 per cent compared to last year while lumber prices rose by 2.2 per cent for the month and 7.0 per cent since May 2011.

The price indexes for finished nonresidential buildings, which measure what contractors estimate they would charge to put up new structures, mostly inched up for the past month and are now beginning to outpace increases in construction materials prices, Simonson noted.

The index for new industrial buildings actually declined 0.1 per cent in May and is up only 3.1 per cent for the year. The index for new office construction inched up 0.2 per cent for the month and 3.4 per cent for the year. The price for new warehouse construction also increased by 0.2 per cent in May and rose 4.2 per cent compared to May 2011. The price for new school construction was up 0.1 per cent for the month and 4.3 per cent for the year.

The construction economist added that materials prices are likely to remain moderate for the time being, based on recent reports and future market pricing for diesel fuel, copper and steel. Simonson attributed the slowdown to weakening demand from Europe, as well as China and other developing nations.

Association officials said the new pricing data shows that now is a good time for public and private sector owners to start construction on needed projects.

“The price break makes this an ideal time for both private sector owners and government agencies to start construction,” said Stephen E. Sandherr, the association’s chief executive officer.

“Taxpayers will get a good deal if Congress can complete work soon on long-stalled highway and transit funding, and avoid making further cuts to building and infrastructure construction projects while prices are still relatively low.”

DCN NEWS SERVICES

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