Construction Commodity Prices Remain Volatile

Home building generally creates demand for nonresidential facilities, so the extremely weak housing recovery is not generating much demand for new projects.

In spite of a still-depressed construction sector, material prices remain unusually volatile, with some recent increases, according to Kermit Baker, AIA Chief Economist. Overall, prices for construction commodities have increased 7.5 percent over the past year, just slightly higher than the 7.3 percent overall increase in wholesale prices.

In the overall wholesale price index, energy costs have been the main culprit. Without food and energy prices factored in, the overall index rose by just over 2 percent. However, price volatility in the construction sector certainly extends beyond energy costs.

Steel, copper and aluminum prices have all increased 10 percent or more over the past year, offsetting price declines for lumber and many concrete products. Some analysts feel that price pressures for construction commodities are shifting.

According to Ken Simonson, chief economist of the Associated General Contractors of America, ''The noise has died down over diesel, steel and copper prices. Now the attention has shifted to asphalt, plastic, roofing, and insulation.''

Momentum is beginning to shift in the nonresidential construction sector, but even after the markets begin to recover, there is a long climb to get back to the levels enjoyed before the recession.

- Courtesy of AIA