Material price relief is within sight

Some prices will stay above the 2005 level

June 20, 2006 |

Widespread commodity price declines in the last month will provide some relief in construction materials inflation which spiked up to 1.2% in May from April for both construction commodities and finished construction products.

Copper prices dropped 30% as the speculative bubble burst. However, pipe, tube and wire prices will remain well above the 2005 level through next year.

Lumber prices dropped 10%.Credit this to the abrupt cutback in housing starts prompted by a two month surplus of new homes for sale.Further significant lumber price declines are not expected during the summer.

Energy prices also fell.Natural gas futures prices averaged several percent lower over the last month which will reduce petrochemical feedstock and plastic prices soon.Crude oil prices declined $2/bbl., dropping gasoline prices $0.05/gal. with an larger decline in gasoline futures prices. It is unlikely that a persistent declining trend has begun but the underlying demand/supply balance in energy markets continues to suggest weaker prices ahead absent any new supply interruptions.

Four of the five products with outsized price increases in May are familiar.Nonferrous pipe and tube increased 17.5% from April to May. Diesel fuel increased 4.0%. Gypsum products increased 3.7%. Most concrete products increased 0.5-1.0%.And lumber prices surged temporarily, increasing 3.7% to the highest level since last June.

Overall PPI inflation was only 0.3% in May.The “core” inflation rate, excluding energy and food, increased 0.2% in May to 1.6% higher than a year ago.This means inflation is contained just below the Federal Reserve Banks’ tolerance limit which keeps the risk minimal of further interest rate increases by the central bank although another 0.25% rise in interest rates is now as likely as not at the end ofJune.

 



Construction Materials

 



Price Index % Change in…

 



 12 months


3 months


1 month

 

 

 

 



Construction Commodities

 

 

 



Dimension Stone


2.0


1.0


-0.7


Cement


14.8


1.8


0.2


Construction Sand, Gravel & Crushed Stone


8.7


2.1


0.3


Softwood Plywood


1.3


-4.1


-5.8


Hardwood Lumber


0.3


-0.2


0.9


Softwood Lumber


3.4


0.2


2.7

 

 

 

 



Other Commodities

 

 

 



Industrial Natural Gas


7.3


-14.0


-2.6


Plastic Resins & Materials


3.3


-4.5


-1.2


Insulation Materials


6.3


0.4


0.2


Iron & Steel Scrap


32.0


11.2


3.6


Iron Ore


17.4


1.9


0.0


Copper Ores


75.9


21.9


8.6


Copper Base Scrap


89.0


36.3


19.3

 

 

 

 



Manufactured Materials

 

 

 



Gypsum Products


26.4


3.8


3.7


Diesel Fuel


40.3


22.4


4.0


Asphalt Roofing


10.1


0.7


0.0


Paint


9.3


5.8


0.6


Plastic Construction Products


18.0


-1.1


0.0


Vitreous Plumbing Fixtures


2.4


0.0


0.0


Ceramic Tile


0.8


-1.0


-2.5


Flat Glass


2.2


0.1


0.2


Fabricated Building Steel


4.4


0.3


0.4


Architectural Metalwork


2.9


0.3


0.1


Metal Plumbing Fixtures


3.2


1.0


0.3


Builders' Hardware


2.6


0.7


0.1


Sheet Metal Products


2.1


1.3


1.1


Steel Pipe and Tube


1.1


2.0


0.5


Nonferrous Pipe and Tube


94.5


36.9


17.5


Building Brick


9.1


2.3


-0.3


Ready Mix Concrete


12.9


3.2


0.5


Concrete Block & Brick


7.5


1.2


0.2


Prestressed Concrete


18.3


15.2


0.9


Precast Concrete Products


6.7


2.6


0.7


Concrete Pipe


5.2


-1.0


0.0


Wood Kitchen Cabinets


2.5


0.9


0.8


Millwork (window,door, cabinet)


2.6


0.7


0.2


Engineered Wood Products


1.7


-0.5


-0.1

 

 

 

 



Assembled Equipment

 

 

 



Hand and Edge tools


5.0


1.1


0.3


Power Hand Tools


-1.1


-1.0


-0.7


Appliances


0.9


0.1


-0.2


Furnaces


1.3


0.3


0.0


Construction Machinery


3.8


0.1


0.2


Metal Doors, Sash and Trim


3.9


2.4


0.4

 

 

 

 



Summary

 

 

 



Construction Materials


7.3


2.1


1.2


Inputs to Consruction Industries


9.6


3.8


1.2


Inputs to NR Construction


11.5


4.8


1.5


Inputs to SF Construction


8.1


2.4


0.9


Inputs to MF Construction


9.0


3.2


0.9


Inputs to Highway & Street Const.


15.9


7.4


1.7


Inputs to Other Heavy Construction


10.4


5.0


1.5


New Warehouse Building Construction


7.7


1.5


0.0


(output index incl. instalation and overhead)

 

 

 

 

 

 



Production Index: Construction Supplies


7.1


0.8


0.4


Retail Sales: Building & Equipment Supplies


13.6


-0.4


-1.6

 

 

 

 

 

 

 

 



Source: US Department of Labor, Federal

 

 

 



Reserve Board, Census Bureau

 

 

 

 

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