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Contractors Squeezed Again By Bump in Materials Prices

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America’s contractors are still feeling the pinch between reduced levels of construction spending and increases in materials prices as, for the fifth consecutive month, prices for construction materials increased—rising 1.1% in February—according to the March 16 Producer Price Index (PPI) report by the U.S, Dept. of Labor. Year-over-year, construction materials prices are up 6.1%.

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“Given the ongoing malaise in both residential and nonresidential construction in the U.S., February’s price increases are noteworthy,” said Associated Builders and Contractors Chief Economist Anirban Basu. “A number of factors appear to be driving input prices higher, including a weakening U.S. dollar, ongoing expansion in the global economy and unrest in the Middle East.”

A number of categories experienced significant increases in materials prices in February. Steel mill product prices jumped 4.7% for the month and are up 13.3% year-over-year. Iron and steel producer prices were up 2.8% in February and are up 16.8% over the last 12 months. Nonferrous wire and cable prices increased 1.4% in February and are 11.9% higher from the same time last year. Prices for fabricated structural metal products increased by 0.9% in February and are up 4.6% year-over-year. Prepared asphalt, tar roofing and siding prices increased by 0.6% for the month and are up 2% over the past 12 months.

“However, the data do not reflect recent events in Japan. While the situation is heartbreaking, it may temporarily interrupt the upward movement in overall materials prices. Japan is a large oil consumer and its economy is suffering in the aftermath of the earthquake and tsunami,” said Basu.

“Despite two decades of sluggish economic performance, Japan’s economy remains the third largest in the world. Once rebuilding efforts begin in Japan, materials prices may begin to rise again and actually increase to the point that they will be more substantial than they have been over the past five months,” Basu said.

Categories in which prices declined include softwood lumber, down 2.7% in February, but up 0.2% compared to the same time last year. Plumbing fixtures and fittings prices slipped 0.2% for the month but are up 1.5% year over year. Concrete product prices were down 0.2% for the month and down 0.4% from February 2010.

Crude energy prices increased 0.9% for the month and are unchanged from the same time last year. Overall, the nation’s wholesale prices jumped 1.6% in February—the largest increase since June 2009. Year over year, wholesale finished goods prices are up 5.8%.


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