Construction Material Costs Decline in November

Construction input prices – for raw materials and related project essentials – fell 1.1 percent in November month-over-month, led by declines in diesel fuel, steel, copper and aluminum. A survey of nearly 600 construction firms released by the AGC in December indicated that many firms have already cut back on investments in construction equipment and supplies to prepare for the new year.

The producer price index (PPI) for construction inputs "?u covering materials that go into every type of project, plus items consumed by contractors like diesel fuel "?u decreased 1.1 percent in November, following a slight decline in October and increases in September and August. The index climbed 1.0 percent year-over-year.

The price index for diesel fuel fell 7.4 percent in November, and declined 4.0 percent over 12 months. Prices for copper and brass mill shapes dropped 3.3 percent in November and 0.9 percent year-over-year. Steel mill products dropped 1.3 percent for the month and 9.3 percent for the year.

The index for lumber and plywood gained 1.9 percent in November, and added 9.3 percent over the prior year. Indexes for gypsum products gained 0.4 percent month-to-month and 14.9 percent year-over-year, and architectural coatings were unchanged for the month but rose relative to October 2011 "?u by 14.1 percent and 5.5 percent respectively.

''Many of these price changes appear to be short-term,'' said Ken Simonson, chief economist for the Associated General Contractors of America. ''Steel, gypsum and even concrete suppliers have announced hefty price hikes for December or January. As a result, contractors who have already bid to install these materials at fixed prices may be headed for losses, and even bankruptcy.''

The indexes that reflect what contractors would charge for their work rose less than materials costs over 12 months, adding 1.0 percent for industrial buildings, 1.4 percent for new office construction, 1.5 percent for schools, and 2.6 percent for new warehouses.