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Construction Materials Prices Inch Higher in June

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Overall construction materials prices increased by 0.1% in June and are up 1.9% year over year, according to the July 16 producer price index release by the U.S. Dept. of Labor. Nonresidential construction materials prices also expanded 0.1% for the month and are 1.4% higher than one year ago.

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“Prices for inputs to construction industries have now risen in five of the year’s first six months,” said Associated Builders and Contractors Chief Economist Anirban Basu. “This marks a significant departure from the previous year’s remarkable stability. Recent monthly gains have been modest—0.1% in June and unchanged in May; however, the surprisingly upbeat economic news from China (Chinese GDP grew 7.5% in the second quarter), along with a slew of large construction starts in specific regions of the U.S., suggest that prices may continue to rise—albeit modestly— through the second half of 2014.

“A number of international conflicts could apply upward pressure on material prices,” said Basu. “The Middle East is as turbulent as ever and as construction volume increases, any supply-related disruptions could lead to a period of meaningful price inflation.

“The effects of the metal financing scandal at Qingdao port in China—the world’s seventh busiest port— are also yet to be seen,” said Basu. “In May, Chinese authorities launched an investigation into Decheng Mining, a private metals-trading firm that used fraudulent warehouse receipts to obtain several loans against a single cargo of metal. As more firms take legal actual against Decheng, we simply do not know the extent to which the financing fraud will impact the metals market.”

Crude energy materials prices expanded 1.2% in June and are 6% higher than one year ago. Natural gas prices fell by 1.5% in June and have now fallen in three of the past four months. Overall, the nation’s wholesale goods prices expanded by 0.4% in June and are up 1.9% year over year.

The following materials prices have increased.

• Crude petroleum prices increased 3.2% in June and are up 5.6% from June 2013.

• Crude energy materials prices expanded by 1.2% in June and are 6.0% higher year-over-year.

• Softwood lumber prices expanded 2.3% and are 7.3% higher than one year ago.

• Prices for plumbing fixtures expanded 0.4% in June and are up 2.4% on a year-over-year basis.

• Concrete products prices expanded 0.4% in June and are up 3.5% on a yearly basis.

• Steel mill products prices rose 0.5% for the month and are 4.1% higher than one year ago.

Five of the 11 key construction inputs did not experience price increases for the month.

• Prices for prepared asphalt, tar roofing, and siding declined 1% for the month and are down 6.6% on a year-over-year basis.

• Fabricated structural metal product prices remained flat for the month but have increased 1.3% on a year-over-year basis.

• Iron and steel prices declined 0.2% in June but are up 4.6% from the same time last year.

• Nonferrous wire and cable prices remained flat on a monthly basis but are down 1.6% from June 2013.

• Natural gas prices shed 1.5% in June but are 12.9% higher than one year ago.

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