Foreign Demand Causes Construction Material Prices to Spike

Construction material prices experienced a 9% growth rate during the first quarter of 2006, with international markets, especially Asia, greatly influencing price surges. The pace of inflation, however, is projected to gradually taper off to about 4% by the end of 2007.Five product areas account for most of the inflation: cement, copper, diesel fuel, industrial natural gas, and gypsum products. Cement, copper, and diesel fuel prices are largely set in international markets, but foreign trade for industrial natural gas and gypsum products is negligible and showed the least amount of inflation in early 2006. Of the five problem products, it appears that natural gas and gypsum are the most likely to have stable or declining prices later this year.

The outlook for cement, copper, and diesel fuel, which experienced a surge in foreign markets in late 2005, indicates that there is little prospect for prices to stabilize or decline by the end of 2006. Prices for these three commodities rose significantly during the spring and will likely rise again during the summer.