Friday, 22 May 2009

Construction materials cost continue downward trend

The price of construction materials continued their downward trend, falling 0.4 percent in April 2009, according to a May 14 producer price index report by the U.S. Department of Labor. On a year-over-year basis, construction input prices dropped 3.7 percent.

“Given the weakness of the broader economy, lower construction materials prices are a necessary ingredient to stimulate nonresidential construction in segments not directly impacted by the American Recovery and Reinvestment Act of 2009,” suggest the Associated Builders & Contractors chief economist Anirban Basu. “It is hoped that producer prices will remain low or continue to decline allowing developers to move ahead with projects, in part, because of limited financing opportunities.”

Asphalt felts and coating prices dropped 10.5 percent in April, the largest month-over-month decline in 55 years. Prices for fabricated structural metal products fell by 1 percent from March, marking the seventh consecutive monthly decline, but are still up 0.7 percent on a year-over-year basis. Fabricated ferrous wire prices decreased 0.7 percent in April while maintaining a year-over-year increase of 2.9 percent.

In contrast, softwood lumber prices increased, for the first time in seven months, by 1.6 percent. Still, year-over-year, softwood lumber prices are down 10.2 percent. Plumbing fixtures and fittings prices rose by 0.5 percent compared to the previous month, and are 1.1 percent higher than a year ago.

Crude energy prices went up by 2.9 percent in April after a 1.6 percent increase in March, driven by an increase in crude petroleum prices of 9.2 percent. Overall, a spike in food costs drove the nation’s wholesale prices up 0.3 percent from March, but prices are still down 3.5 percent on a year-over-year basis.

“There remains significant debate regarding the recent run-up in oil and other commodity prices,” Basu noted in this week's ABC Newsline. "Some believe that this is a reflection of rising inflationary expectations, which are emerging primarily due to a combination of extreme monetary and fiscal stimulus. Others believe that there are more mundane explanations, including growing seasonal demand for certain commodities and growing confidence in the performance of the global economy as 2010 approaches.

“Whatever the explanatory factors, any consequential increase in construction materials prices would be unfortunate from a broader national perspective,” Basu said. “The nation remains in the midst of a period characterized by substantial infrastructure investment, and rising construction materials prices would ultimately hurt the ability of federal, state and local governments to purchase more infrastructure projects.”

To read the entire ABC Construction Economic Update, click here.

1 comment:

boom trucks said...

There aren't any materials from this industry that goes down. When we think of construction industry, it involves many heavy equipments like the crane trucks where it plays one of the big roles in the job. We cannot deny that they are the key player with regards to heavy jobs in the construction site.