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Construction Material Costs Drop

Thursday, March 5, 2015

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Prices for construction materials are steadily declining, which comes as welcome news for many contractors and their clients.

Overall, prices in January showed a 2 percent decline from the month before and a 3.6 decline from January 2014, according to U.S. Department of Labor figures. Construction input prices have now failed to rise for six consecutive months.

construction
©iStock.com / damircudic

Falling construction material costs tend to bolster margins and increase the likelihood that certain construction projects will move forward.

The Producer Price Index showed nonresidential construction prices fell 2.1 percent in January and dropped 4.6 percent from the same period a year ago.

Coatings Prices Mixed

Architectural coatings prices in January dipped 1.5 percent from December and 1.4 percent from January 2014, according to the Bureau of Labor Statistics' PPI report.

Prices of specialty-purpose coatings, which include marine, industrial construction and maintenance coatings, remained flat between December and January and saw a 2.2 percent bump from the same period a year ago.

Oil Savings Show

“The decline in oil and petroleum prices finally showed up in the PPI data,” according Anirban Basu, the Associated Builders and Contractors’ chief economist.

“According to the Bureau of Labor Statistics, crude petroleum prices fell 30.6 percent for the month and 54.8 percent for the year, but other input categories also experienced downward pressure, including nonferrous wire and cable and softwood lumber.”

PPI
Associated Builders and Contractors

Construction material costs are forecast to drop further due to a strong U.S. dollar and ongoing weakness in Europe, according to Associated Builders and Contractors' Chief Economist Anirban Basu.

Basu expects the cost of construction materials to continue to drop, due in part to a lack of supply response to the significant price declines, ongoing weakness in Europe, and a strong U.S. dollar.

Good and Bad

Falling input prices tend to “bolster margins, increase the likelihood that certain construction projects will move forward, and allow the Federal Reserve to maintain its accommodative monetary stance,” the economist added.

coating wood
©iStock.com / kanvagi

Architectural coatings prices dipped 1.5 percent in January and 1.4 percent from the same period in January 2014, according to the producer price index.

“For contractors who are involved in oil exploration and mining activities, the news is not nearly as positive,” Basu noted.

Key Construction Materials

Prices dipped or remained flat for eight of 11 key materials.

  • Iron and steel prices fell 0.6 percent from December to January and 6.7 percent from the same time last year.
  • Fabricated structural metal product prices remained flat for the month and have expanded 1.2 percent on a year-over-year basis. 
  • Nonferrous wire and cable prices fell 3.3 percent on a monthly basis and 6.4 percent on a yearly basis
  • Steel mill products prices fell 1.2 percent for the month and 1.5 percent year over year.
  • Softwood lumber prices fell 1.5 percent for the month and 0.6 percent over 12 months.
  • Crude petroleum prices fell 30.6 percent from December to January and 54.8 percent year over year.
  • Crude energy materials prices fell 23.6 percent in one month and 38.4 percent from January 2014 to January 2015.
  • Natural gas prices fell 28.9 percent in January and 29.3 percent from one year ago.

In contrast, a few key construction materials saw price spikes:

  • Plumbing fixture prices expanded 0.8 percent in January and 3.9 percent year over year.
  • Concrete products prices expanded 0.5 percent in January and 4.8 percent on a yearly basis.
  • Prices for prepared asphalt, tar roofing, and siding rose 2.7 percent for the month and 4.2 percent on a year-ago basis.

   

Tagged categories: Building materials; Construction; Contractors; Department of Labor; Economy; Government

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