The cost of construction materials decreased in November while other producer prices rose, according to Ken Simonson, chief economist for the Associated General Contractors of America (AGC).
“The next 12 months are still likely to show higher costs for construction than for the economy as a whole,” Simonson warns. He was commented on the Dec. 19 producer price index (PPI) report from the Bureau of Labor Statistics.
“The index for construction material and components dropped half a percent in November, even as the overall PPI for finished goods climbed 0.8 percent,” Simonson says. “But over the last 12 months, construction costs have jumped 5 percent, vs. 2 percent for the consumer price index and a skimpy 0.9 percent for the finished goods PPI.”
Simonson adds that the recent plunge in construction costs was widespread, but not universal. “There were price declines in November for diesel fuel and asphalt, plastic construction products, lumber and plywood, gypsum products and steel and copper products. But there were continuing increases in the prices of most concrete products, brick and aluminum mill shapes.”
Simonson expects the ongoing retreat in home construction to keep downward pressure on gypsum and wood prices, but he says petroleum, cement and metals remain at historically high levels, which will tilt nonresidential construction costs up.
“As long as demand in industrializing countries remains strong, construction is likely to face higher costs for materials that depend on world markets,” Simonson says. “And with diesel prices stuck near $2.60 per gallon the cost of deliver materials to jobsites and running the equipment to install them will keep costs high.”