Bureau of Labor Statistics Reports Construction PPIs, Futures Prices Show Mixed Trends
The producer price index (PPI) for finished goods increased 0.7% in April, seasonally adjusted, following advances of 1% in March and 1.3% in February, the Bureau of Labor Statistics (BLS) reported. Over the past 12 months, the index rose 3.2%. The “core” index, which omits volatile food and energy prices, was unchanged in the past two months and rose just 1.5% for the 12-month span. The PPI for construction materials and components climbed 0.6% in April and 3% over 12 months. Among BLS’s five construction segments, the indexes for materials for heavy construction climbed 1.9% for the month and 4.8% over 12 months; nonresidential buildings, 1.2% and 3.3%; multi-unit residential, 0.8% and 3.5%; and single-unit residential, 0.6% and 2.7%. Among major construction inputs, the PPI for diesel fuel jumped 8.1% for the month but only 3.3% over 12 months; concrete products, 0 and 4.6%; plastic construction products, 0.6% and -1.9%; gypsum products, -2.1% and -6.6%; steel mill products, 4.4% and 17%; copper and brass mill shapes, 16% and 27%; lumber and plywood, 0.2% and -10%. Of the three new PPIs for finished structures, the index for warehouse construction fell 0.3% for the month and rose 6% over 12 months; school construction, -0.1% and 14%; and the index for office construction, 0.7% for the month and 7.3% over the 10 months since its introduction. BLS also made mostly minor adjustments to final 2006 PPIs.
Indicators for future price movements of construction inputs are mixed. Copper futures have moved up 25% this year but were little changed this week and are 10% below last May’s record. In its monthly Short-Term Energy Outlook (www.eia.doe.gov/steo), released on Tuesday, EIA forecasted that heating oil would average $2.38 per gallon, up just 0.8%.
The construction material experiencing some of the steepest price increases is stainless steel. Two ingredients for making stainless are nickel, the price of which set another record today on the London Metals Exchange, and stainless steel scrap. The Wall Street Journal, citing Ryan’s Notes reporting service, reported today that Thursday’s spot price for stainless steel scrap was up 168% from a year ago.
Although manufacturing employment has been declining and new orders for U.S. manufactured goods have been volatile, manufacturing construction is rising strongly. Recently, the supervisory board of Germany-based ThyssenKrupp AG approved a $4.2 billion investment in a new plant to make flat carbon and stainless steel in Mt. Vernon, AL, 35 miles north of Mobile. “Approximately 29,000 jobs will be generated during the construction phase,” according to a release on the state website, www.alabama.gov. Output will include construction products. Additional construction will result from state-promised investment in infrastructure and training facilities. The Census Bureau reported last week that spending on manufacturing structures rose 16% from the first quarter of 2006 to January-March 2007.
This information was supplied by The Data DIGest, a weekly summary of economic news compiled by Kenneth D. Simonson, chief economist for the Associated General Contractors of America. All rights reserved.