Construction Material Prices Continue Free Fall in December

Construction material prices fell for the sixth consecutive month in December, losing 1.2 percent on a monthly basis and 4 percent on a yearly basis according to an analysis of the Bureau of Labor Statistics Producer Price Index recently released by Associated Builders and Contractors (ABC). Construction input prices have fallen 7.2 percent since peaking in August 2014, and have fallen in eleven of the previous sixteen months. Nonresidential construction input prices exhibited similar declines, falling 1.1 percent for the month and 4 percent for the year.

“Construction input prices continued to sink to the end of 2015, due in large measure to global deflationary forces that have become increasingly apparent,” said ABC Chief Economist Anirban Basu. “The World Bank predicts that the global economy will expand by less than three percent in 2016, very limited growth by historic standards. Last year, the global economy expanded by just 2.4 percent, with significant weakness recorded in much of the emerging world. Like last year, major emerging nations like Russia and Brazil are anticipated to be in recession.

“In addition, the U.S. dollar remains strong,” said Basu. “With only a couple of exceptions, the U.S. is the only major nation to increase interest rates. If interest rates rise as anticipated, the dollar will strengthen further in 2016, placing additional downward pressure on input prices. Even significant geopolitical events involving oil producing nations has not been enough to stem the decline in oil or other commodity prices.”

graph-32Only four key input prices expanded in December on a monthly basis:

Natural gas prices expanded 5.2 percent month-over-month but are down 46.5 percent year-over-year.

  • Prices for prepared asphalt and tar roofing and siding products rose 1 percent on a monthly basis but are down 2 percent on a yearly basis.
  • Concrete product prices ticked 0.3 percent higher from November and are up 3 percent from the same time one year ago.
  • Fabricated structural metal product prices inched 0.1 percent higher for the month but are 0.9 percent lower than at the same time one year ago.

Seven key input prices fell in December on a monthly basis:

  • Crude petroleum prices plunged 16 percent month-over-month and are 43.3 percent lower year-over-year.
  • Crude energy materials prices fell 5.7 percent for the month and are down 35.8 percent for the year.
  • Softwood lumber prices shed 2.9 percent from November and are 6.8 percent lower than at the same time one year ago.
  • Steel mill product prices dipped 2.7 percent for the month and 19.8 percent for the year.
  • Prices for nonferrous wire and cable fell 2.7 percent on a monthly basis and are down 9.9 percent on a yearly basis.
  • Iron and steel prices are down 2.2 percent for the month and 23.7 percent for the year.

Prices for plumbing fixtures and fittings fell 0.5 percent month-over-month but expanded 1.3 percent year-over-year.

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