The current round of construction materials
inflation continued in May 2007 with the index up 0.8%, the fourth consecutive
increase after nine months of no change.
The current round of construction materials inflation (as
set out in the Producer Price Index series of the U.S. Bureau of
Labor Statistics) continued in May 2007 with the index up 0.8%, the
fourth consecutive increase after nine months of no change. Cement, plywood,
plastics and steel all posted outsized increases. The 1.7% month-to-month
increase in cement prices and the 3.4% rise in plywood prices signal increased
materials demand in the U.S. construction market. The 1.6% steel price increase
and the 0.8% rise in plastics prices are partly due to higher world commodity
demand, but probably also are a sign of improved U.S. construction materials
demand. Retail sales of building materials picked up in May.
Inflation for manufactured products remains tame, except for
the tail end of the pass-through from previous metal price increases. Copper
scrap prices soared again, with more labor disruptions in Latin American mines.
Expect another round of price spikes soon for copper, brass and bronze
Homebuilders and their suppliers are still seeing relatively
weak prices for their key materials because of the housing collapse. The price
index for single-family materials increased only 0.3% in May. Gypsum fell 5.3%
and softwood lumber 1.3%. The gap in inflation rates between the housing market
and the rest of construction will likely widen a little more in the next few
months, but will be closing by the end of the year.
Non-residential contractors had a 1.1% rise in May in the
prices of the mix of materials that they use, due to the ongoing rapid gains in
non-residential building. However, 1.1% is well above the trend expected for
the rest of this year.
Heavy contractors are still experiencing the highest
inflation because the mix of materials that they buy has relatively little
labor content. Full story >>