The
PPI for inputs to construction industries rose 0.4% for the month and 4.5% over 12
months. Although higher than the finished goods PPI, the 12-month increase was
the mildest for construction materials since the year ending in September 2010.
The
producer price index for finished goods climbed 0.3%, not seasonally adjusted
(0.1%, seasonally adjusted), from December to January and 4.1% year-over-year,
the
Bureau of Labor Statistics reported Feb.
16. The PPI for inputs to construction industries - a weighted average of the
cost of materials used in every type of construction, plus items consumed by
contractors, such as diesel fuel and tires - rose 0.4% for the month and 4.5%
over 12 months. Although higher than the finished goods PPI, the 12-month
increase was the mildest for construction materials since the year ending in
September 2010.
PPIs
for new nonresidential buildings had similar increases: industrial buildings,
0.3% for the month and 3.5% over 12 months; offices, 0.6% and 4%; warehouses,
0.5% and 4.2%; and schools, 0.6% and 4.6%. PPIs for new, repair and maintenance
work by nonresidential building subcontractors varied more: concrete
contractors, -0.2% and 1.3%; electrical, 0.2% and 3.2%; plumbing, 0.9% and
4.4%; and roofing, 0.7% and 4.6%.
The
largest annual increases in PPIs for materials used in construction were for
diesel fuel, 3.2% and 19%; truck and offroad tires, 0.2% and 14%; asphalt
paving mixtures and blocks, 1.4% and 9.7%; steel mill products, 1.3% and 9.4%;
insulation materials, 2.9% and 7.9%; and gypsum products, 5.9% and 7.6%. At the
other extreme were copper and brass mill shapes, -0.7% and -13%; lumber and
plywood, 0.2% and -2.2%; and aluminum mill shapes, -0.8% and -1.7%. Concrete
products rose 0.7% and 1.4%.
Price
trends since data were gathered for the PPI report in mid-January have been
mixed. Retail on-highway diesel prices have climbed 9.5 cents per gallon in the
past three weeks and were 41 cents (12%) higher than a year ago, the
Energy Information Administration
reported Feb. 13. Suppliers of polyvinyl chloride (PVC) and other plastic
plumbing products have announced 6% to 10% price increases to take effect in
the next two weeks. But there have been selective steel price cuts.
Housing starts, factory output
Housing
starts rose 1.5% in January, seasonally adjusted, from an upwardly revised
December total, and were 9.9% higher than in January 2011, the
Census Bureau reported Feb. 16.
Single-family starts dipped 1% for the month but rose 16% year-over-year, while
multifamily starts rose 8.5% in January but dropped 4% over 12 months. Weather
may have been a factor: many regions experienced much warmer and drier
conditions than normal in December 2011 and January 2012, and worse-than-normal
weather a year earlier.
Building
permits, an indicator of near-term starts, rose 0.7% for the month and 19% over
the year-ago month, with single-family permits up 0.9% and 6.2% and multifamily
up 0.4% and 55%. Multifamily permits and starts tend to be volatile from month
to month, but a comparison of the latest three-month average with the prior
three months and the year-ago period shows strong upward trends in both permits
and starts.
Industrial
production in manufacturing increased 0.7% seasonally adjusted, in January,
after jumping 1.5% in December, and was up 4.5% from January 2011, the
Federal Reserve reported Feb. 15. The
Fed noted, “The output of construction supplies fell 0.4% in January following
a gain of 3% in December. In January, the output of construction supplies was
5.3% above its level of a year earlier but remained well below its pre-recession
peak.”
Capacity
utilization in manufacturing rose to 77% in January from an upwardly revised
76.5% in December. The January level was the highest since April 2008 but was
still below the 1972-2011 average of 78.9%. Rising output and capacity
utilization over time can signal increased demand for manufacturing
construction.
A
sharp drop in natural-gas prices (down 35% in the past year and 80% from the
peak in 2008), along with the prospect of further declines, has multiple
implications for construction.
“Thanks
largely to natural gas money, Wyoming invested millions of dollars in upgrading
roads and schools, while socking away more than $1 billion in its rainy day
fund,” the online newsletter
Stateline.org reported Feb. 17. “But the
boom is over for Wyoming,
at least for now. A precipitous drop in the price of natural gas has sent state
lawmakers scrambling to make budget cuts….New Mexico and Texas also are seeing
drops in revenues related to natural gas, although the pain there, as in
Oklahoma, is compensated by surging oil revenues….An era of cheap natural gas
may also pose a challenge to state efforts to boost wind, solar and nuclear
power, since natural gas is relatively clean burning for a fossil fuel….
“While
drilling is down in some places, however, it is up in others. Some energy
companies are shifting away from drilling for so-called ‘dry’ natural gas in
order to increase production of liquid natural gas. This ‘wet’ gas contains
chemicals such as propane, helium and butane, which can be sold on their own.
Because of that extra value, experts expect drilling will only increase in Ohio, home to the mostly wet Utica shale formation.
“That
shift could come at the expense of Pennsylvania,
whose Marcellus formation yields mostly dry gas within the state’s borders. [In
Texas,] low
gas prices have led to low prices for wholesale electricity. And that is making
utility companies reluctant to build infrastructure that would help Texas meet the
electricity demands of its growing population.”
