The costs of construction materials continues to move downward as prices fell 0.3 percent last month, according to the February 19th producer price index (PPI) report by the U.S. Labor Department. This is the fourth consecutive month that construction materials prices have fallen. However, on a year-over-year basis, prices are still up 1.8 percent from January 2008 (see graph below).

Prices for fabricated structural metal products fell for the third straight month, down 1.4 percent, but are still up 10.2 percent from the same time one year ago. Plumbing fixtures and fittings prices edged up 0.5 percent from December and are up 4.3 percent from last January.  Prices for fabricated ferrous wire products continue to decline, down 0.8 percent from last month, but are still posting prices 18.4 percent higher than January 2008. Softwood lumber prices decreased for the fifth straight month, down 3.5 percent from December and 8.5 percent from a year ago.  Asphalt felts and coatings prices fell for the third straight month, down 2.5 percent, but are still 50.4 percent higher than last January.

Crude energy prices decreased 8.1 percent in January following a 5.5 percent decrease in December. Overall, U.S. wholesale prices rose 0.8 percent following five straight months of declines but are still down 1 percent from a year ago.

What This Means 

“One of the few bright spots in the economy is that we live in subdued inflationary times,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. “Both consumer prices and producer prices have been in retreat, a reflection of extraordinarily weak demand for goods and services throughout the global economy. This weakness has certainly become apparent in commodity prices, which have generally trended lower. 

“Indeed, it is not clear whether Congress considered the presence of falling construction materials prices in forging the economic stimulus package, signed into law by President Obama. Since peaking in September 2008, construction input prices are down 8.4 percent in the aggregate,” added Basu.

“Had they done so, Congress likely would have bolstered investment in infrastructure, since the decline in construction input prices signifies that the government can purchase more infrastructure per dollar,” said Basu “The falling construction input prices also accelerate the pace of the eventual recovery in nonresidential construction, since developers and others will be better positioned to forge ahead with their projects.”