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Construction Materials Prices Slip Again in June

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The amount contractors pay for a range of key construction materials decreased for the second consecutive month in June and inched up by just 0.5% from a year earlier, according to a new analysis of producer price index figures recently released by the Associated General Contractors of America.

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Meanwhile, the amount contractors charge to construct projects was virtually unchanged for the month and rose only between 3.2% and 4.4% from a year ago.

“Contractors are finally seeing sustained relief from the outsized cost increases that buffeted them last year,” said Ken Simonson, the association’s chief economist. “The half-percent rise in the producer price index for construction inputs from June 2011 to June 2012 was the smallest year-over-year swing since December 2009.”

Simonson observed that falling prices for a variety of key construction materials contributed to the mild overall increase. The price index for diesel fuel plunged 9.0% in May and is down 10.7% from a year ago. The index for copper and brass mill shapes slumped 4.1% for the month and 12.6% since June 2011.

Similarly, aluminum mill products dropped in price from a month and 12 months earlier, by 0.5% and 9.2%, respectively, while the index for steel mill products slipped 1.3% and 3.2%. The index for plastic construction products edged down 0.4% in June and was up 1.9% over 12 months.

A few materials posted substantial increases for the month and year, Simonson added. The index for gypsum products increased by 1.1% in June and 13.2% compared with June 2011, while the index for asphalt paving rose by 1.2% and 6.6%, respectively.

 The price indexes for finished nonresidential buildings, which measure what contractors estimate they would charge to put up new structures, mostly held steady in June and rose modestly year-over-year, Simonson noted.

The index for new industrial buildings posted a rise of 0.1% in June and 3.2% over 12 months. The index for new office construction was flat for the month and up 3.4% for the year. The price for new warehouse construction also stayed level in June; that index rose 4.2% from June 2011. The index for new school construction was up 0.1% for the month and 4.4% for the year.

“A noticeable but uneven pickup in U.S. construction activity, along with sluggish global economic growth, should keep these price trends in place for a few more months,” Simonson predicted. “Private owners and public agencies with money to spend on projects would do well to get started now, before the next price spike.”

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