Construction Materials Prices Plummet in First Month of 2015

On Feb 18, 2015

Construction input prices dipped 2 percent in January 2015 and have now failed to rise for six consecutive months, according to the Feb. 18 producer price index (PPI) release from the U.S. Department of Labor. On a year-over-year basis, construction input prices are down 3.6 percent. In addition, nonresidential construction input prices fell 2.1 percent on a monthly basis and 4.6 percent on a yearly basis.

“The decline in oil and petroleum prices finally showed up in the PPI data,” said Associated Builders and Contractors Chief Economist Anirban Basu. “According to the Bureau of Labor Statistics, crude petroleum prices fell 30.6 percent for the month and 54.8 percent for the year, but other input categories also experienced downward pressure, including nonferrous wire and cable and softwood lumber.

“There are reasons to believe that prices will continue to be suppressed by a host of factors, including a strong U.S. dollar, the lack of supply response to the significant price declines and ongoing weakness in Europe, which is translating into low interest rates throughout the advanced world,” said Basu. “In general, falling input prices are good for contractors since they tend to bolster margins, increase the likelihood that certain construction projects will move forward, and allow the Federal Reserve to maintain its accommodative monetary stance. For contractors who are involved in oil exploration and mining activities, the news is not nearly as positive.”

The following materials prices increased in January:

• Prices for plumbing fixtures expanded 0.8 percent in January and are up 3.9 percent on a year-over-year basis
• Concrete products prices expanded 0.5 percent in January and are up 4.8 percent on a yearly basis
• Prices for prepared asphalt, tar roofing, and siding gained 2.7 percent for the month and are up 4.2 percent on a year-ago basis
• Eight of the 11 key construction inputs did not expand for the month
• Iron and steel prices fell 0.6 percent in January and are down 6.7 percent from the same time last year
• Fabricated structural metal product prices remained flat for the month and have expanded 1.2 percent on a year-over-year basis
• Nonferrous wire and cable prices fell 3.3 percent on a monthly basis and 6.4 percent on a yearly basis
• Steel mill products prices fell 1.2 percent for the month and are 1.5 percent lower than one year ago
• Softwood lumber prices fell 1.5 percent and are 0.6 percent lower than one year ago
• Crude petroleum prices fell 30.6 percent in January and are down 54.8 percent from the same time last year
• Crude energy materials prices fell 23.6 percent in January and are 38.4 percent lower year over year
• Natural gas prices fell 28.9 percent in January and are down 29.3 percent from one year ago

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