Construction Materials Prices fall 0.9% in June.
Press Release Summary:
Following 3 months of increases, price of construction materials and supplies in June fell 0.9%, according to July 15 PPI report by U.S. Labor Department. However, prices are up 0.8% for second quarter of year and are 4.2% higher from June 2009. According to ABC Chief Economist Anirban Basu, construction materials prices relate to direction of commodity prices, and therefore decline in prices may reflect investor sentiment rather than actual foreshadowing of lost construction momentum.
Original Press Release:
Construction Materials Prices Fall 0.9 Percent in June
"It should be noted that while materials prices fell last month, they were still higher for the quarter. Therefore, it is far too soon to tell whether June represented an anomaly or is the signal of a new trend." -ABC Chief Economist Anirban Basu.
Following three months of increases, the price of construction materials and supplies in June fell 0.9 percent, according to the July 15 producer price index (PPI) report by the U.S. Labor Department. However, prices are up 0.8 percent for the second quarter of the year and are 4.2 percent higher from June 2009 (See Analysis below)
Most commodities tracked by ABC posted decreases for the month. Iron and steel prices were down 2 percent in June, but are still up 3.8 percent for the second quarter and up 34.2 percent on a year-over-year basis. Similarly, steel mill product prices were down 1.3 percent last month, but are 2.1 percent higher for the quarter and up 30.5 percent from the same time last year. Nonferrous wire and cable prices were down 2 percent for the month and 2.1 percent lower for the quarter, but are still up 13.6 percent over the past twelve months.
Prices for prepared asphalt, tar roofing and siding fell 2.4 percent for the month, up 1.4 percent for the quarter, and down 0.6 percent from June 2009. Prices for concrete products dipped 0.2 percent for the month, were unchanged for the second quarter, and are down 2 percent from the same time last year. Softwood lumber prices were down 9 percent for the month, the largest monthly decrease since 1980. Because this was the first decrease in producer prices for softwood lumber since October 2009, prices were down just 1.3 percent for the quarter, but are 21.9 percent higher year-over-year.
Producer prices for plumbing fixtures inched up 0.2 percent in June, but remained unchanged for the quarter and are up 0.9 percent from June 2009. Prices for fabricated structural metal products were up slightly at 0.1 percent for the month, up 1.6 percent for the quarter and are 1.3 percent higher from the same time last year.
A 2.7 percent spike in natural gas prices caused crude energy prices to increase 1.7 percent last month. Crude energy prices are down 9.2 percent for the quarter, but are 6.4 percent higher from June 2009. Overall, the nation's wholesale prices dipped 0.5 percent in June, while core finished goods prices - minus food and energy - were up 0.1 percent, the eighth straight monthly increase. Year-over-year, finished goods prices are up 2.8 percent.
Analysis
"Typically, economists and others look to the producer price statistics by the Bureau of Labor Statistics in order to determine whether inflationary forces are mounting," said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. "But, there is another aspect of economic life to which these data pertain, namely the demand for finished goods.
"Given significant declines in the price of softwood lumber and a number of other materials, there is at least some indication of prospective construction slowing in the months ahead. However, this is subject to a separate interpretation," said Basu. "Construction materials prices relate neatly to the direction of commodity prices, and therefore the decline in these prices may be more of a reflection of investor sentiment than an actual foreshadowing of lost construction momentum.
"In any case, one can take heart in the notion that inflationary forces remain in check and that materials prices remain reasonably well behaved," Basu said. "All things being equal, falling materials prices would be consistent with a more rapid rebound in construction spending as purchasers of construction services are induced to move forward with their respective projects, thanks to a lower price point.
"It should also be noted that while materials prices fell last month, they were still higher for the quarter. Therefore, it is far too soon to tell whether June represented an anomaly or is the signal of a new trend," said Basu.
