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A weak construction environment is keeping prices for domestically priced construction materials stable to slightly lower but this is being more than offset by continuing gains in internationally priced commodities used in construction materials. The commodity price surge is coming from the resumption of economic growth in most industrial countries and the return to very rapid economic growth in developing countries.

US commodity prices are also being pushed up by a new round of speculative investment in commodities and by a depreciating $US, down 6% in the last six months. Currency depreciation has an immediate impact on oil prices. Congressional action this week on a new $300 B plus stimulus program will raise the federal deficit and add further downward pressure on the value of the $US.

By next spring the commodity price surge should be tempered by anti-inflation programs to slow economic growth in developing countries and austerity programs to reduce budget deficits in industrial countries, especially in Europe. At the same time, accumulated spending growth so far in the US economic recovery will become enough to stop declines in domestically priced construction materials. As a result expect the US construction materials price index to rise about 5% in 2011, well ahead of overall inflation.

November prices rose 5.8% for nonferrous pipe and tube, 4.8% for diesel fuel and 4.2% for aluminum. For domestically priced products, lumber prices increased 2.2% but concrete, gypsum, brick and glass prices all declined slightly. The latest commodity market price quotes suggest a further rise in oil and metal prices in December.

US Construction-Related Price Indexes – November 2010

  Percent Change versus…   3 years ago year ago 3 months ago previous month Construction Commodities   Dimension Stone 9.4 -1.4 -0.8 -1.6 Cement -9.7 -6.2 -1.1 0.5 Asphalt Paving Mixtures and Blocks 35.1 3.1 -7.3 1.9 Construction Sand, Gravel & Crushed Stone 10.3 1.7 -0.4 -0.5 Softwood Plywood -10.5 3.5 -10.4 -4.1 Hardwood Lumber -0.6 9.0 -1.6 -0.6 Softwood Lumber -2.8 6.1 -0.3 2.2 Other Commodities   Industrial Natural Gas -20.9 -8.0 -5.7 0.6 Plastic Resins & Materials 5.8 13.4 3.6 1.8 Insulation Materials 4.5 5.6 2.1 0.0 Iron & Steel Scrap 33.2 46.2 1.7 4.3 Iron Ore 17.0 7.9 1.0 -0.1 Copper Ores 8.6 31.1 36.3 11.3 Copper Base Scrap 21.2 26.4 9.0 2.2 Manufactured Materials   Gypsum Products -2.0 0.4 -3.0 -0.2 Diesel Fuel -13.8 18.4 10.6 4.8 Asphalt Roofing 56.4 4.9 -3.0 0.1 Paint 14.2 -1.5 1.7 1.0 Plastic Construction Products 7.4 3.6 1.2 0.7 Vitreous Plumbing Fixtures 5.1 2.0 0.0 0.0 Ceramic Tile 0.3 -0.4 -1.5 -1.7 Flat Glass -1.5 -2.4 1.8 -1.2 Fabricated Building Steel -2.4 -0.6 0.2 0.1 Hot rolled bars, plates & structural shapes 3.8 15.0 2.3 -0.3 Extruded Aluminum rod, bar and other shapes -3.5 10.5 8.5 4.2 Architectural Metalwork 15.0 1.7 -0.6 -0.2 Metal Plumbing Fixtures 5.4 1.3 0.0 0.0 Builders’ Hardware 11.3 1.7 0.1 0.9 Sheet Metal Products 5.1 2.3 -0.5 -0.1 Steel Pipe and Tube 23.7 17.8 -0.4 -0.8 Nonferrous Pipe and Tube 21.3 29.5 19.2 5.8 Building Brick -1.0 -0.4 -0.6 -1.7 Ready Mix Concrete 2.0 -0.8 0.0 -0.1 Concrete Block & Brick 3.4 -1.1 -0.1 0.2 Prestressed Concrete -4.7 5.9 -0.5 0.0 Precast Concrete Products 6.6 1.0 -0.3 -0.2 Concrete Pipe 5.9 -4.0 0.3 0.7 Wood Kitchen Cabinets 3.9 0.1 0.0 0.0 Millwork (window, door, cabinet) 3.3 0.5 -0.1 0.0 Engineered Wood Products 0.4 3.4 0.0 -0.3 Laminated Plastics 5.7 1.5 0.3 -0.2 Assembled Equipment   Hand and Edge tools 7.5 -0.8 0.2 0.0 Power Hand Tools 2.5 0.6 -0.1 -0.1 Appliances 5.0 0.3 0.2 0.1 Furnaces 2.6 -1.2 -1.8 1.5 Construction Machinery 5.9 0.3 -0.1 -0.4 Construction Machinery Rental    (includes oilfield equipment) -2.7 -0.9 2.5 0.0 Trucks over 14,000 Ibs. GVW 10.6 2.6 -0.2 0.2 Metal Doors, Sash and Trim 5.5 1.4 0.8 0.2 Summary   Construction Materials (commodity level) -0.4 -0.2 2.3 5.7 Inputs to Construction 0.5 1.0 4.7 7.5 Inputs to Residential Construction 0.4 0.7 5.1 8.2 Inputs to Commercial Construction 0.4 0.8 n/a n/a Inputs to Industrial Construction 0.4 1.0 n/a n/a Inputs to Heavy Construction    (indexes incl. installation and overhead) 0.6 1.3 n/a n/a New Warehouse Building Construction 0.0 0.5 0.6 2.1 New School Building Construction 0.0 0.2 1.0 10.8 New Office Construction 0.3 0.0 -0.5 2.6 Production Index: Construction Supplies 0.2 0.7 7.7 -19.1 Retail Sales: Building & Equipment Supplies -0.1 4.9 12.0 -6.7

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