new producer price index shows slight increase in construction goods

Lumber, plywood, and fabricated steel have all seen price increases in the last month, according to the most recent Producer Price Index.

That index, as compiled by the Bureau of Labor Statistics, measures the average national change in the price of basic goods and services on a monthly basis.

Overall, looking at all goods and services, the PPI decreased by 0.2 percent in June. This follows a 0.4 percent increase in May.

Compared with where things stood a year ago, the PPI is down by 0.8 percent.

In a statement, the Bureau said the “decrease in the final demand index is attributable to a 0.3 percent decline in prices for final demand services.”

The statement adds: “Prices for final demand, less foods, energy, and trade services, advanced 0.3 percent in June, the largest increase since a 0.3 percent rise in January.”

The PPI for new building construction, looking at the prices that contractors charge, declined by 0.3 percent in June, after a 0.1 percent drop the month before.

This compares with a 5.5 percent rise from June of last year and represents the smallest increase seen since the early summer of 2017.

Increases in the PPI for new repair and maintenance work done by subcontractors on nonresidential buildings saw a 1.9 percent increase over this same time last year. In this category, plumbing contract work was up by 2.1 percent, while electrical contractors saw a 3.2 percent increase.

One of the largest increases was seen in the roofing contractor sector with a 3.7 percent price jump.

“The slowing in the general economy caused by the pandemic has lowered construction activity levels,” notes the Journal of Commerce in looking at the newest PPI figures. “In recent months, the pressure on prices has mostly been easing, rather than percolating more heatedly.”

It is expected that the final demand construction index, soft at around 2.2 percent over the year, will stay that way for the time being as contractors try to secure a smaller number of available projects.

The construction industry is also coping with a 27 percent rise in diesel fuel, as well as a jump in fabricated structural steel at 12 percent.

Lumber and plywood prices, at the same time, continue to post gains, rising by 5.7 percent in the last month. That’s 6.6 percent higher than where those prices stood exactly a year ago.
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Industry analysts say the lumber and plywood price increase is the result of a production decline during the early months of the COVID-19 outbreak, and a subsequent increase in demand due to increased home building, among other factors.

​By Garry Boulard

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