December 24, 2012

Material costs drop in United States

WASHINGTON, D.C.

Construction materials costs in the United States dropped in November, aided by a plunge in diesel prices along with smaller decreases in a variety of other inputs, according to an analysis of new federal figures released Dec. 19 by the Associated General Contractors of America.

Association officials noted that some of the price declines may be related to the fact that the threat of the fiscal cliff is already having an impact on demand for construction and related materials.

“The recent price decreases are very welcome after years of price spikes that contractors could not pass on in a weak construction market,” said Ken Simonson, chief economist for the construction trade association.

“These price declines may be yet another sign that the threat of the fiscal cliff has already taken a toll on demand.”

For the 12 months ending in November, the producer price index for all construction inputs rose 1.0 per cent, closely matching the increase in prices contractors charge for new buildings.

Between October and November, however, construction materials prices fell by 1.1 per cent, while the amount contractors charge to build industrial buildings, new offices and new warehouses was unchanged and down 0.3 per cent for new school construction. 

Simonson said prices fell for the month and the year for diesel fuel (-7.4 per cent for the month and -4.0 per cent for the year), steel (-1.3 per cent for the month and -9.3 per cent for the year), copper (-3.3 per cent for the month and -0.9 per cent for the year) and aluminum (-0.8 for the month and -3.5 for the year). 

The overall decrease was offset by increases in prices for gypsum products such as wallboard (0.4 per cent for the month and 14.9 per cent for the year), lumber and plywood (1.7 per cent for the month and 9.3 per cent for the year) and architectural coatings (unchanged for the month, but up 10.5 per cent for the year).

“Demand for gypsum and architectural coatings products has risen sharply as apartment and home construction have soared in recent months,” Simonson commented.

“The gypsum and lumber price increases might also reflect the surge in demand from areas hit by Hurricane Sandy.”

A survey of nearly 600 construction firms released by the association in mid-December indicated that many firms have already changed business practices because of the twin threat of spending cuts and tax increases included in the fiscal cliff. 

In particular, many firms noted they were cutting back on investments in construction equipment and supplies, likely contributing to the decline in materials prices, association officials cautioned.

“Washington’s inability to resolve the threat of the pending fiscal cliff is already having an impact on construction activity and employment levels,” said Stephen E. Sandherr, the association’s chief executive officer. 

“Construction activity would unquestionably be stronger if firms knew what they would be paying in taxes starting three weeks from now.”

For more information about the Associated General Contractors of America visit www.agc.org.

DCN NEWS SERVICES

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