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Economist links construction materials' upward pricing to harsh winter

Source: Associated Builders & Contractors, Washington, D.C.

Through April, concrete products and iron & steel prices were up 3.4 percent and 3.2 percent year over year, while overall construction materials prices rose 1.5 percent against the first four months of 2013, according to the U.S. Department of Labor’s mid-May Producer Price Index.

“Construction materials prices have increased for five consecutive months, the longest streak in more than two years,” says Associated Builders and Contractors Chief Economist Anirban Basu. “While some may interpret this as the onset of a period associated with significantly higher inflation, it seems more likely that the consistent uptick in prices is at least partially attributable to the colder-than-normal winter, which interrupted the usual flow of construction inputs. Nationally, construction spending has not been rising in recent months, which implies increases in materials prices are not a purely economic phenomenon.”

Crude energy materials prices fell 3.3 percent in April, but are still 6.6 percent higher than one year ago. Natural gas prices decreased more than 10 percent for the second consecutive month. Overall, the nation’s wholesale goods prices expanded 0.7 percent in April and are up 3.1 percent year over year. “The nationwide surge in prices is almost entirely attributable to food prices, which increased 2.7 percent in April alone,” observes Basu. “Any crops that weren’t damaged by the harsh winter are now struggling to survive through a drought affecting large portions of the western United States.”

Five of the 11 key construction inputs did not experience price increases in April, he adds: nonferrous wire and cable prices decreased 1.8 percent on a monthly basis and are 3.8 percent lower than in April 2013; prices for prepared asphalt, tar roofing, and siding declined 2.2 percent for the month and are down 4.6 percent on a year-over-year basis; and, softwood lumber prices fell 2.5 percent and are 8.3 percent lower than one year ago. Natural gas prices fell 12 percent in April but are 15.1 percent higher than in April 2013. Crude energy prices declined 3.3 percent in April, but are 6.6 percent higher year over year.