ABC: Construction material prices rise again in May

Construction input prices expanded by 0.7% in May and have now expanded for three consecutive months according to an analysis of the Bureau of Labor Statistics Producer Price Index released by Associated Builders and Contractors (ABC). The rise follows eight consecutive months during which construction input prices fell; prices remain 3.4% below their year-ago level. 

Nonresidential construction input prices expanded by 0.9% in May, but are still 3.5% below their year-ago level. Price gains were largely driven by iron and steel prices and steel mill product prices, which expanded 5.8% and 4.6% for the month, respectively. 

"After falling sharply during all of 2015 and into the early months of 2016, an increase in global commodities prices had to happen as markets firmed," said ABC Chief Economist Anirban Basu. "While much attention has been given to the recent rise in oil prices to around $50 per barrel, other commodity prices have also experienced a resurgence, including iron ore.  

"That said, the global economy continues to disappoint relative to expectations established at the start of the year," said Basu. "Higher prices may stimulate new rounds of production, including in energy markets, but the implication is that prices are unlikely to rise smoothly or dramatically going forward. Analyst views regarding the direction of commodity prices diverge wildly. While supply and demand play a role in fashioning commodity prices, so too does the value of the U.S. dollar. U.S. interest rates remain low and in many cases have been declining. The dollar has correspondingly weakened in recent weeks. Should that continue, commodity price increases could be sharper than we presently anticipate."

Nine key input prices expanded or remained unchanged in May on a monthly basis:

• Crude petroleum prices expanded 0.6% from April 2016, but are down 32.5% from May 2015.
• Unprocessed energy material prices expanded 0.9% on a monthly basis, but have fallen 23.1% on a year-ago basis. 
• Prices for steel mill products expanded 4.6% from a month ago, but are down 5.2% on a yearly basis. 
• Iron and steel prices expanded 5.8% month-over-month, but are down 2% year-over-year. 
• Softwood lumber prices expanded 2.2% for the month and 6.3% from May 2016. 
• Fabricated structural metal prices remained unchanged month-over-month and are down 1.9% year-over-year.
• Prices for plumbing fixtures and fittings expanded 0.2% for the month and are up 0.3% from the same time last year. 
• Prices for prepared asphalt and tar and roofing and siding products expanded by 0.4% month-to-month and 0.7% year-over-year. 
• Natural gas prices rose 2.9% for the month, but are down 23.5% from the same period one year ago. 

Two key input prices declined on a monthly basis:

• Nonferrous wire and cable prices fell 1.3% on a monthly basis and have fallen 9.2% on a yearly basis. 
• Concrete product prices inched down by 0.1% month-over-month, but are up 3% year-over-year.