Construction materials prices rose only 0.1 percent in September and are up just 0.6 percent year over year, according to the October 29 Producer Price Index release by the Department of Labor. Nonresidential construction materials were unchanged for the month and are 0.1 percent higher than one year ago. “Despite surging stock and asset prices, geopolitical uncertainty in many parts of the world and the ongoing extraordinary monetary stimulus in the United States, construction materials prices have remained remarkably stable,” said Associated Builders and Contractors Chief Economist Anirban Basu. “This trend stands in stark contrast to the volatility experienced throughout much of this decade, including the growth in prices in 2004, 2007 and 2008.”
Overall, the nation’s wholesale goods prices fell 0.1 percent in September and are up 0.3 percent year over year. In large measure, this reflects a U.S. economy that continues to struggle to expand at a pace greater than 2 percent.
“Uncertainty emanating from Washington D.C., may temper the dramatic turnaround suggested by other economic indicators, such as Europe coming out of a recession and growth in China firming up,” Basu said. “If the United States were to find a more permanent solution for its budgetary issues, the pace of materials price increases likely would accelerate.
“That said, this recent streak of month-to-month stability may continue,” Basu said. “Similar to September, the majority of nonresidential construction-related categories saw price changes of less than 1 percent in absolute value. More specifically, iron and steel, asphalt, tar roofing, siding and steel mill products all changed less than 0.4 percent.”
The following materials prices increased in September:
• Fabricated structural metal product prices edged up 0.2 percent and have risen 0.1 percent on a year-over-year basis.
• Softwood lumber prices climbed 1.2 percent and are 9.8 percent higher than one year ago.
• Nonferrous wire and cable prices rose 0.1 percent, but are down 3.4 percent from September 2012.
• Steel mill products prices edged 0.3 percent higher, but are 4.4 percent lower than one year ago.
• Natural gas prices grew 0.2 percent in September and are 25.8 percent higher than September 2012.
• Crude petroleum prices rose 0.6 percent and are up 7.9 percent year over year.
• Crude energy prices expanded 2 percent in September and are 9.7 percent higher than last year.
A number of key construction inputs did not experience price increases for the month:
• Prices for plumbing fixtures and fittings decreased 0.3 percent, but are up 1.7 percent on a year-over-year basis.
• Concrete products were unchanged in September and are up 3.1 percent on a yearly basis.
• Prices for prepared asphalt, tar roofing, and siding fell 0.1 percent for the month, but are 2.9 percent higher than September 2012.
• Iron and steel prices decreased 0.3 percent and remain 3.9 percent lower than the same time last year.
To view the previous Producer Price Index report, click here.
Construction Employment Resumes Growth
Overall national construction employment rose by 20,000 jobs in September, with nonresidential construction employment gaining 12,000 positions, according to an October 22 report by the Department of Labor. The national construction unemployment rate stood at 8.5 percent in September on a non-seasonally adjusted basis, down from 9.1 percent in August and 11.9 percent at the same time last year. Since September 2012, the construction industry has added 193,000 jobs, or 3.4 percent. Of that total, 37 percent is attributable to nonresidential activities, down from 42 percent in August 2013.
“After a five-month losing streak, nonresidential employment bounced back in September,” said ABC Chief Economist Anirban Basu. “Every major segment of nonresidential construction exhibited job growth, including nonresidential specialty trade contractors, which accounted for roughly one-third of jobs added by the sector.”
Following are segments of construction employment that exhibited growth:
- Nonresidential construction employment rose by 5,200 jobs for the month and is up 23,400 jobs, or 3.5 percent, since September 2012.
- Residential building construction employment grew by 1,200 jobs last month, which is a positive sign after the sector lost 600 jobs in August.
- Nonresidential specialty trade contractors gained 6,800 jobs for the month and employment is,2.3 percent (48,000 jobs) higher than at the same time last year.
- Residential specialty trade contractors added 4,100 jobs in September and have added 88,600 jobs, or 6 percent, compared to September 2012.
- Employment for heavy and civil engineering construction was up by 2,500 jobs for the month and is up by 18,600 jobs, or 2.1 percent, on a year-over-year basis.
“Heavy and civil engineering construction employment experienced expansion in September, a factor that is often viewed as a leading economic indicator for the nonresidential construction industry,” Basu said. “Indeed, there appears to be a significant level of pent-up demand for new construction. Four years of economic recovery have transpired, gradually improving real estate and financing conditions. Construction materials prices have been generally well behaved and leading indicators, such as the Architecture Billings Index and ABC’s Construction Backlog Indicator, also have turned positive.
“The coming year should be associated with high single-digit growth in nonresidential construction spending, with the implication being that the industry will continue to add jobs,” Basu said. “Still, there is likely enough uncertainty emanating from Washington D.C., and other places to prevent a dramatic turnaround in nonresidential construction. For now, there is not enough forward-looking transparency to permit aggressive recovery.”
Across all industries, the nation added 148,000 jobs, falling short of the average 185,000 jobs that have been added per month during the past year. The private sector expanded by 126,000 jobs and the public sector added 22,000 jobs. According to the Bureau of Labor Statistics’ household survey, the national unemployment rate fell slightly to 7.2 percent in September, down from 7.3 percent in August and 7.8 percent in September 2012. This is partially due to a dismal labor force participation rate, which remained at just 63.2 percent, a 35-year low.