The amount contractors pay for a range of key construction materials decreased for the second consecutive month in June and inched up by just 0.5% from a year earlier, according to an analysis of producer price index figures released by the Associated General Contractors of America (AGC). Meanwhile, the amount contractors charge to construct projects was virtually unchanged for the month and rose only between 3.2% and 4.4% from a year ago.
"Contractors are finally seeing sustained relief from the outsized cost increases that buffeted them last year," said Ken Simonson, AGC's chief economist. "The half-percent rise in the producer price index for construction inputs from June 2011 to June 2012 was the smallest year-over-year swing since December 2009."
Simonson observed that falling prices for a variety of key construction materials contributed to the mild overall increase. The price index for diesel fuel plunged 9.0% in May and is down 10.7% from a year ago. The index for copper and brass mill shapes slumped 4.1% for the month and 12.6% since June 2011. Similarly, aluminum mill products dropped in price from a month and 12 months earlier, by 0.5% and 9.2%, respectively, while the index for steel mill products slipped 1.3% and 3.2%. The index for plastic construction products edged down 0.4% in June and was up 1.9% over 12 months.
A few materials posted substantial increases for the month and year, Simonson added. The index for gypsum products increased by 1.1% in June and 13.2% compared with June 2011, while the index for asphalt paving rose by 1.2% and 6.6%, respectively.
The price indexes for finished nonresidential buildings, which measure what contractors estimate they would charge to put up new structures, mostly held steady in June and rose modestly year-over-year, Simonson noted. The index for new industrial buildings posted a rise of 0.1% in June and 3.2% over 12 months. The index for new office construction was flat for the month and up 3.4% for the year. The price for new warehouse construction also stayed level in June; that index rose 4.2% from June 2011. The index for new school construction was up 0.1% for the month and 4.4% for the year.
"A noticeable but uneven pickup in U.S. construction activity, along with sluggish global economic growth, should keep these price trends in place for a few more months," Simonson predicted. "Private owners and public agencies with money to spend on projects would do well to get started now, before the next price spike."
Association officials urged Congressional leaders to provide adequate funding for infrastructure projects while materials costs have moderated. "The price relief means some projects will actually cost less than they would have a year ago," said Stephen E. Sandherr, the association's chief executive officer. "The public will miss a rare opportunity unless Congress funds needed increases in water, building and other infrastructure."
