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Key Construction Materials Prices Drop Slightly in May

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The amount contractors pay for a range of key construction materials edged down 0.3% in May and climbed by only 2.3% from a year earlier, according to an analysis of producer price index figures released last week by the Associated General Contractors of America. Meanwhile, the amount contractors charge to construct projects remained largely flat for the month and is up only between 3.1% and 4.3% for the year.

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“The slowdown in construction input price increases is a rare and possibly short-lived event,” said Ken Simonson, the association’s chief economist, noting that the last time prices rose so slowly from a year earlier was in February 2010. “Meanwhile, some of the price increases we are seeing for materials like gypsum and lumber reflect a strengthening new residential and commercial remodeling construction.”

Simonson noted that prices for a number of key construction materials declined between April and May. The price index for diesel fuel dropped 3.6% in May and is down 0.2% compared to last year. The index for copper and brass mill shapes declined 1.6% for the month and 8.3% since May 2011. Likewise, aluminum mill products dropped in price for the month, by 1.9% and fell 9.0% from a year earlier.

Meanwhile, the index for gypsum products increased by 1.2% in May and 13.6% compared to last year while lumber prices rose by 2.2% for the month and 7.0% since May 2011.

 The price indexes for finished nonresidential buildings, which measure what contractors estimate they would charge to put up new structures, mostly inched up for the past month and are now beginning to outpace increases in construction materials prices, Simonson noted.

The index for new industrial buildings actually declined 0.1% in May and is up only 3.1% for the year. The index for new office construction inched up 0.2% for the month and 3.4% for the year. The price for new warehouse construction also increased by 0.2% in May and rose 4.2% compared to May 2011. And the price for new school construction was up 0.1% for the month and 4.3% for the year.

The construction economist added that materials prices are likely to remain moderate for the time being, based on recent reports and future market pricing for diesel fuel, copper and steel. Simonson attributed the slowdown to weakening demand from Europe, as well as China and other developing nations.


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