Materials costs ease but no reversal yet

Materials costs for nonresidential buildings are now almost 12% higher than the nearly steady price levels that prevailed throughout 2000–03. Most of the increase occurred from February to May, when suppliers were caught short of inventory. Materials supplies then briefly caught up with demand in June and July, sharply reducing materials inflation. Additional, but smaller price spikes for lumber occurred in August when residential construction jumped briefly higher, and again in the early fall when hurricane preparation and repair demand boosted plywood and panel prices.

Expect the higher prices to generally hold, although recent lumber and plywood price rises will drop back to early summer levels by the end of the year. Ahead, overall materials price inflation will subside to a 2–3% annual pace through next year. This results from a pause in materials demand growth late in 2004.