APRIL 14 PRODUCER PRICES (04/15/2009)


Prices of Construction Materials Prices Point Down in March


Summary


Construction materials prices fell for the sixth consecutive month dipping 0.6 percent in March, according to the April 14th producer price index (PPI) report by the U.S. Labor Department. On a year-over-year basis, construction input prices have fallen 1.9 percent (see graph below).

Prices for fabricated structural metal products continue to drop, down 0.8 percent from February of this year, but are still 4.6 percent higher than the same time last year. Prices for plumbing fixtures and fittings inched up 0.3 percent in March and are up 1.8 percent from a year ago.  Nonferrous wire and cable prices increased for the first time since July 2008, up 1.1 percent from last month, but still down 23.5 percent from March 2008.

Softwood lumber prices continue to tumble, down 3.5 percent on the month and down 11.3 percent on a year-over-year basis. Prices for asphalt felts and coatings climbed 4.4 percent from February and are 60.3 percent higher than March 2008. After posting an 8.5 percent decrease the previous month, crude energy prices rose 1.6 percent in March due to a 30 percent increase in crude petroleum prices. 

Overall, the nation’s wholesale prices fell 1.2 percent in March. This is the largest year-over-year decline since 1950.

What This Means

“Construction input prices have now slipped into negative territory on a year-over-year basis.  This is significant because it provides potential relief to profit margins that continue to be squeezed by the weak economy and fierce pricing competition between firms,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu.

“For the first time in recent memory, bids on many publicly-financed projects are coming in below budgetary expectations, a reflection of retreating producer prices, as many firms search for revenues in the hope to rebuild their construction backlogs,” added Basu.

“The implication from today’s data is that the recession remains ongoing and will continue to be reflected in producer prices in the months ahead,” stated Basu.

“To many observers, it may be surprising that it required sixteen months of recession to bring construction input prices down on a year-over-year basis,” said Basu. “However, this decline in prices is consistent with widely accepted theories of price behavior.”