Construction Materials Prices Continue to Climb

A monthly report by the Associated Builders and Contractors (ABC) notes that prices for construction materials have increased by 0.9 percent in January 2011, the fourth straight monthly increase. The increase, ABC warns, is a sign that inflation is starting to creep into the construction industry. Further, ABC adds that the monthly Producer Price Index for January 2011 is 4.9 percent greater than the same time last year.

Broken out by individual materials, the group reports that iron and steel prices jumped 4.7 percent in January and are up 16.4 percent over the last twelve months. Softwood lumber prices increased by 3.6 percent for the month and are up 8.7 percent year-over-year. Steel mill product prices increased 2 percent for January and are up 11.5 percent from the same time last year. Prices for fabricated structural metal products posted the largest monthly increase since August 2008, up 1.2 percent in January and up 4 percent from the same time last year. Prices for plumbing fixtures and fittings inched up 0.3 percent for the month and are up 1.4 percent year-over-year. Prices for prepared asphalt, tar roofing and siding increased by 0.1 percent for the month and are up 3.6 percent from January 2010.

Non-ferrous wire and cable prices decreased for the first time since last July, down 0.8 percent in January, but still 9.1 percent higher from the same time last year. Concrete product prices slipped 0.8 percent in January, and are unchanged year-over-year.

Crude energy material prices increased by 1.9 percent in January, but are down 4.3 percent from the same time last year. Overall, total wholesale goods prices were up 0.8 percent in January and are up 3.6 percent from January 2010.

“It may be that the inflation people have been predicting for months is finally here,” says Anirban Basu, ABC’s chief economist in a release. “Energy prices rose again, but the bigger story revolves around the broadening of inflation in other categories.

“For construction contractors, this puts additional downward pressure on already thin profit margins. With the cost of construction rising in many instances, developers and others may choose to further delay construction starts. This, of course, represents bad news for an industry already associated with an unemployment rate above 20 percent and spending volumes that are nearly 25 percent below late-2008 levels. The hope is that speculators will not continue to pour money into commodities and that material prices will be better behaved in the months ahead,” says Basu.