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AGC's Data DIGest: May 06 – May 17, 2013

PPI, other cost measures show little change; housing starts tumble but permits soar

Editor’s note:  Construction Citizen is proud to partner with AGC America to bring you AGC Chief Economist Ken Simonson's Data DIGest. Check back each week to get Ken's expert analysis of what's happening in our industry.

The producer price index (PPI) for finished goods dropped 0.3%, not seasonally adjusted (-0.7%, seasonally adjusted), in April and 0.6% over 12 months, the Bureau of Labor Statistics (BLS) reported on Wednesday. The PPI for inputs to construction—a weighted average of the cost of all materials used in construction plus items consumed by contractors such as diesel fuel—slipped 0.1% for the month and inched up just 0.4% year-over-year. Inputs for residential construction were flat for the month and increased 1.4% in price over the year, while inputs for nonresidential construction edged down 0.1% and 0.4%, respectively. Two building materials accounted for much of the difference: the PPI for lumber and plywood soared 2.5% and 20% and the index for gypsum products climbed 0.3% and 20%. In addition, the PPI for prepared asphalt and tar roofing and siding products rose 2.1% and 6.0%. In contrast, fuel and metals prices mostly declined: diesel fuel, -0.7% for the month and -6.0% year-over-year; aluminum mill shapes, -2.5% and -4.1%; copper and brass mill shapes, -2.7% and -6.0%; and steel mill products, 0.4% and -8.5%. The PPI for paving materials and blocks fell 0.8% and 1.8% but the index for concrete products increased 0.9% and 3.1%. Indexes for most new nonresidential building construction and subcontractors’ work rose modestly. The PPIs for new schools was up 0.4% in April and 0.3% from a year ago; offices, 0.8% and 0.6%; industrial buildings, 0.6% and 1.4%; warehouses, 0.5% and 2.2%; and the index for new health care buildings was up 0.5% since March and since June 2012, when it was introduced. The PPI for new, repair and maintenance work on nonresidential buildings by electrical contractors was stable in April and up 0.1% over 12 months; concrete contractors, up 0.6% and 1.3%, respectively; plumbing contractors, 0.3% and 1.5%; and roofing contractors, 0.8% and 2.2%.

Construction costs (materials, labor and equipment rental) increased 0.5% from January 1 to April 1 and 2.0% over the past 12 months, according to the RS Means Historical Construction Cost Index released by Reed Construction Data on Monday. The index represents the average of costs in 30 cities, based on data collected by RS Means.

A monthly survey of building products manufacturers, distributors and buying groups released today by Thompson Research Group suggests a mix of stable and increasing prices. The wallboard industry is “maintaining support for the 25%-30% price increase in 2013.” Insulation: “CertainTeed announced a June 10%-15% price increase and supply now on allocation.” Roofing: “February price 10%-12% increase mostly successful. Too early to call the relative success of the May price increase. Encouraged by lack of ‘functional discounts’ in early 2013.” Flooring: “March low to mid single digit carpet price increase success looks promising. Relative success of the May hard wood flooring price increase too early to call.” Ceiling tile—“April ceiling pricing flattish sequentially” and up year-over-year. The national average retail price of on-highway diesel fuel was 13 cents or 3% lower than a year ago, the Energy Information Administration reported on Monday. “Framing lumber prices have been dropping since peaking on April 5,” Econoplay.com reported on May 10, citing data from Random Lengths and a lumber supplier. “They fell $2 on April 12, another $15 on April 19, down $14 on April 26, and down $18” on May 3.

Seasonally adjusted housing starts tumbled 16% in April but were still 13% higher than a year earlier, the Census Bureau reported on Thursday. Some analysts ascribed the one-month decrease to severe weather in April and pointed out that permits continued to climb, indicating builders still intend to start more projects in the near future. Multifamily starts (5 or more units) plunged 38% from March and were down 2.5% from a year ago. Single-family starts slid 2.1% for the month but were up 21% year-over-year. Building permits increased 14% for the month and 36% from April 2012, with multifamily permits leaping 41% and 55%, respectively, and single-family permits rising 3.0% and 27%.

Industrial production (IP) in manufacturing fell 0.4%, seasonally adjusted, in April and rose a meager 1.3% from April 2012, the Federal Reserve reported on Wednesday. IP for construction materials fell 0.8% for the month and rose 1.8% year-over-year. Capacity utilization in manufacturing decreased for the second month in a row, to 75.9% of capacity, well below the 1972-2012 average of 78.7%. Declining utilization and sluggish growth in production may signal weaker demand ahead for new factory construction.

“A moderate net fraction of banks reported having eased their CRE [commercial real estate] lending standards over the past three months and relatively large fractions continued to report an increase in demand for such loans,” the Fed reported on May 6 in summarizing responses from senior lending officers at 68 large U.S. banks and subsidiaries or branches of 21 large foreign banks to a survey conducted April 2-16. “On net, U.S. branches and agencies of foreign banks reported that standards on CRE loans were about unchanged, but moderate fractions reported that demand strengthened on such loans.”

The Data DIGest is a weekly summary of economic news; items most relevant to construction are in italics. All rights reserved. Sign up at www.agc.org/datadigest.

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