October marked the fifth consecutive month when construction input prices failed to rise. Inputs to construction industries were down 0.9% for the month but expanded 1% on a year-over-year basis, according to a Nov. 17 producer price index (PPI) release from the U.S. Dept. of Labor. Inputs to nonresidential construction fell 1.1% for the month but are 0.5% higher than at the same time last year.
“This deflation in an array of commodities should be viewed positively for the economy as well as for nonresidential construction,” said Associated Builders and Contractors Chief Economist Anirban Basu. “Deflation can be a reflection of declining demand for goods and services, including for construction. However, the deflation being observed presently will help widen contractor margins and, in some cases, increase the likelihood that construction projects will move ahead.”
Crude energy materials prices fell 5.5% in October and are 11.4% lower than one year ago. Natural gas prices fell by 1.2% in October and have now fallen in seven of the past eight months on a monthly basis. On a year-over year basis, however, natural gas prices expanded for the 22nd consecutive month. Overall, the nation’s final demand prices as measured by the PPI expanded by 0.2% in October.
“While weakness in the global economy has helped to produce declining oil, copper, and other prices, U.S. economic growth has remained firm,” said Basu. “The result is contractors, along with the broader economy, are benefiting from cheaper input prices. A strong U.S. dollar has certainly helped, and there is little indication that the U.S. dollar is poised to make a meaningful move in the other direction.”
The following materials prices increased in October.
• Prices for plumbing fixtures expanded 0.1% in October and are up 3% on a year-over-year basis.
• Concrete products prices expanded 0.3% in October and are up 3.8% on a yearly basis.
• Nonferrous wire and cable prices grew 0.1% on a monthly basis and 0.2% on a yearly basis.
• Prices for prepared asphalt, tar roofing and siding expanded 8% for the month but are down 2% on a year-ago basis.
Seven of the 11 key construction inputs did not experience price increases for the month.
• Fabricated structural metal product prices remained flat for the month and have expanded 1.8% on a year-over-year basis.
• Iron and steel prices fell 1.7% in October but are up 2.4% from the same time last year.
• Steel mill products prices fell 0.4% for the month but are 3.5% higher than a year ago.
• Softwood lumber prices fell 2.2% on a monthly basis but are 5.3% higher than a year ago.
• Natural gas prices shed 1.2% in October but are 8.8% higher than a year ago.
• Crude petroleum prices fell 9.8% in October and are down 21.6% from the same time last year.
• Crude energy materials prices fell 5.5% in October and are 11.4% lower year over year.