August 23, 2012
Canadian Construction Material Costs were Placid in June (Part 1)
Chief Economist, CanaData
CanaData calculates construction material cost movements based on two data sets from Statistics Canada – the Industrial Product Price Index (IPPI) series and the Raw Materials Price Index (RMPI) series.
The overall construction material cost index (see table below) is comprised of three sub-indices: residential, non-residential building and engineering. Each of these in turn is made up of components (lumber, steel, cement, concrete, etc.) weighted according to their usage in the specific category of construction.
For example, lumber is more important to residential construction than to the other two categories and fossil fuel-based products make up a larger proportion of material inputs in engineering work.
The bottom line is that the overall construction material cost change in June was a “non-factor.” It fell 0.7% month to month and was ahead only 1.0% year over year. That’s lower than the annual rate of increase (+1.5%) in the Consumer Price Index (CPI).
Only residential construction displayed an upward trend. It was +0.4% month to month and +3.2% year over year. A quarter ago, the year-over-year performance was flat (0.0%).
Lumber has been the trend setter in residential construction costs. The “lumber and other wood products aggregate” was +7.0% year over year, augmented by veneer and plywood at +11.0% and particle board and wafer board, +7.6%.
The non-residential building sub-index was level (0.0%) month to month in June and plus only 1.2% year over year. Cement prices have been trending mildly downward for more than a year. They currently sit 1.0% lower than a year ago.
Ready-mix concrete is +2.0% year over year. Concrete rebar prices are -1.3%.
The iron ore price index is -7.2% year over year. Nevertheless, structural steel shapes are +5.5% compared with June of last year.
Finally, the material cost index for engineering construction is falling behind. Its month to month change in June was -1.9% while year over year it dropped 0.6%.
Three of the key component influences were asphalt (-3.0% m/m and -3.3% y/y), gasoline (-3.6% m/m and -0.8% y/y) and diesel fuel (-7.1% m/m and -4.2% y/y).
Part 2 of this article will present, in graph form, the history of the four key construction series. There will also be discussion of the extreme volatility that can be experienced in our industry.
For more articles by Alex Carrick on the Canadian and U.S. economies, please see his market insights. Mr. Carrick also has an economics blog.
PER CENT CHANGE IN June 2012 INDEX FROM: |
|||||||
| 6 Years Ago |
3 Years Ago |
1 Year Ago |
6 Months Ago |
3 Months Ago |
1 Month Ago |
||
| Total, all commodities | 8.4% | 6.3% | 0.4% | 0.5% | -0.3% | -0.3% | |
| Key Aggregates: | |||||||
| Lumber and other wood products | -0.1% | 5.9% | 7.0% | 5.1% | 2.6% | 0.9% | |
| Primary metal products | 2.0% | 14.4% | -7.4% | -1.0% | -4.1% | -0.3% | |
| Metal fabricated products | 8.8% | 2.7% | 0.9% | 0.3% | 0.2% | 0.2% | |
| Machinery and equipment (includes HVAC) | 6.9% | 0.8% | 3.2% | 0.8% | 0.9% | 0.6% | |
| Electrical and other communications products | -1.3% | -3.4% | 0.9% | 0.2% | 0.9% | 0.4% | |
| Non-metallic mineral products | 8.7% | 1.6% | 0.9% | 0.3% | -0.1% | 0.0% | |
| Petroleum and coal products | 20.5% | 28.2% | -3.2% | -1.2% | -6.7% | -5.0% | |
| Chemicals and chemical products | 21.1% | 13.6% | -0.5% | 1.3% | 1.2% | -0.4% | |
| Construction Inputs: | |||||||
| Veneer and plywood | -3.7% | 3.9% | 11.0% | 8.0% | 5.2% | 3.0% | |
| Particle board and waferboard | -18.4% | 12.4% | 7.6% | 15.6% | 0.1% | 0.1% | |
| Shakes and shingles | -2.1% | -3.8% | 6.2% | 2.3% | 3.5% | 1.7% | |
| Wooden doors, windows, cabinetry, millwork | 1.8% | 2.4% | 1.9% | 2.2% | 0.2% | 0.2% | |
| Gypsum wall board, lath and plaster | -11.3% | -3.2% | 2.5% | 1.1% | 0.0% | 0.0% | |
| Sand and gravel | 29.3% | 7.8% | 1.7% | 1.7% | 1.3% | 0.0% | |
| Glass and glass products | 6.1% | -1.2% | 0.5% | -0.6% | -0.4% | 0.1% | |
| Cement (portland) | 16.8% | 4.8% | -1.0% | 0.2% | 0.0% | 0.1% | |
| Ready-mix concrete | 15.4% | 3.7% | 2.0% | 0.8% | 0.0% | 0.0% | |
| Concrete brick and building blocks | 14.7% | 0.7% | 0.1% | 0.1% | 0.0% | 0.0% | |
| Clay products (brick) | -1.9% | 4.3% | -1.0% | -1.7% | 0.0% | -0.3% | |
| Aluminum structural shapes | -6.9% | 2.4% | -1.5% | -0.1% | -0.6% | 0.2% | |
| Concrete reinforcing bars (including fabricated) | 6.2% | 19.5% | -1.3% | 1.0% | 0.0% | 0.0% | |
| Structural steel shapes (including fabricated) | 17.9% | 14.0% | 5.5% | 1.6% | -0.1% | 0.1% | |
| Prefabricated metal buildings | 5.4% | 0.1% | 0.0% | 0.0% | 0.0% | 0.0% | |
| Doors and windows (metal) | 7.9% | 4.7% | 1.3% | 0.3% | 0.0% | 0.1% | |
| Roofing and siding (metal) | 29.0% | 3.4% | -1.3% | 0.3% | -0.1% | -0.1% | |
| Roof deck and flooring (metal) | 4.8% | -0.6% | -1.7% | 5.9% | 0.0% | 0.0% | |
| Thermal insulation and fibrous glass | -0.8% | 0.2% | 2.0% | 1.4% | 0.0% | 0.0% | |
| Bolts, nuts, screws, washers, fasteners | 9.8% | -5.8% | 0.0% | 0.0% | 0.0% | 0.0% | |
| Builders' hardware | 3.2% | 1.3% | 0.2% | 0.7% | -0.5% | -0.3% | |
| Plumbing fixtures and valves (metal) | 16.9% | 3.3% | -0.5% | -1.0% | 0.0% | 0.0% | |
| Plastic pipes and pipe fittings | 10.3% | 17.0% | 0.1% | 1.8% | 3.0% | -0.1% | |
| Electric wire and cable | 1.8% | 9.8% | 2.3% | 2.4% | 0.3% | 0.0% | |
| Lighting Fixtures (incandescent) | 0.2% | -2.1% | 0.0% | 0.0% | 0.0% | 0.0% | |
| Paint and varnish | 11.6% | 6.7% | 2.4% | 2.1% | -0.2% | 0.0% | |
| "Heavy" Inputs: | |||||||
| Construction machinery and equipment | 13.2% | 1.4% | 0.9% | 0.0% | 0.0% | 0.0% | |
| Mobile earth moving and allied equipment | 15.2% | 0.7% | 2.0% | 0.4% | 0.0% | 0.0% | |
| Mixing and paving equipment (concrete and asphalt) | 2.5% | -0.7% | -0.4% | 0.0% | 0.0% | 0.0% | |
| Steel pipe and tubing (to transport oil and gas) | 5.6% | 3.8% | -1.6% | -0.6% | 0.0% | 0.1% | |
| Concrete pipe | 13.3% | 1.6% | 0.7% | 0.3% | 0.0% | 0.0% | |
| Asphalt (one month behind) | 23.0% | 15.1% | -3.3% | 12.2% | 4.4% | -3.0% | |
| Gasoline (one month behind) | 20.9% | 25.3% | -0.8% | 7.4% | -4.5% | -3.6% | |
| Diesel fuel (one month behind) | 16.7% | 35.2% | -4.2% | -8.9% | -11.8% | -7.1% | |
| Type of Construction Indexes: | |||||||
| Residential | 2.2% | 3.5% | 3.2% | 2.7% | 0.8% | 0.4% | |
| Non-residential building | 9.3% | 6.3% | 1.2% | 1.0% | 0.0% | 0.0% | |
| Engineering construction | 16.2% | 11.9% | -0.6% | 1.6% | -1.5% | -1.9% | |
| TOTAL CONSTRUCTION | 9.6% | 7.7% | 1.0% | 1.9% | -0.4% | -0.7% | |
