The cost of construction materials prices rose 0.2 percent in December 2009, according to a Jan. 20 producer price index (PPI) report by the U.S. Department of Labor. Construction materials prices are 0.4 percent higher than in December 2008.
The slight increase of construction materials prices does not appear to be particularly newsworthy,” said ABC Chief Economist Anirban Basu. “However, the figure masks a growing volatility in the construction market. This volatility is attributable to numerous factors, including growing speculation regarding the health of the U.S. dollar, the growing Chinese economy, the sagging U.S. economy, and other major factors that influence material prices.”
Those commodities regularly tracked by ABC that have seen the greatest change for the month include prepared asphalt, tar roofing, and siding products, up 5.9 percent in December, but still 3.4 percent less than December 2008. Also, nonferrous wire and cable prices climbed 3.9 percent for the month, and are 20.2 percent higher than one year ago. Softwood lumber prices increased 3.8 percent on the month, and 3.5 percent from the same time last year.
“While not all materials prices rose, many of the most important components for ABC members changed substantially in the span of just one month,” said Basu. “This instability makes bidding for jobs more difficult and may be a precursor of what lies ahead in 2010.”
In addition, iron and steel prices are up 1.4 percent for the month, but down 0.9 percent since last year. Fabricated structural metal products increased slightly, up 0.1 percent in December, but are down 7.9 percent compared to December 2008. Prices for plumbing fixtures and fitting remain fairly steady, increasing 0.1 percent for the month and only 0.6 percent compared to a year ago.
Crude energy prices decreased 2.8 percent in December, but are still up 13.2 percent year-over-year. Overall, the nation’s wholesale prices are up slightly, 0.2 percent for the month and 4.4 percent for the year.
“The major variable to watch over the next year may very well be the U.S. dollar,” Basu said. “Any significant move of the dollar in one direction or the other is likely to have significant impact on materials prices. With the structure of the U.S. economy, given the presence of low interest rates, the presumption is any significant move in the dollar will be to the downside. That would likely result in a potential sharp increase in materials prices.”
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