Construction costs drop for June

Construction materials see pattern of one-month decrease and 12-month increase

News Data Digest July 16, 2010
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The producer price index (PPI) for finished goods fell 0.6% in June, or a seasonally adjusted 0.5%, and rose 2.8% compared to June 2009, the Bureau of Labor Statistics reported on Thursday.

The PPI for construction industries inputs, a weighted average of prices for materials used in all types of construction plus items consumed by contractors, such as diesel fuel, dropped 0.9% for the month but was 4.2% higher year-over-year.

Several key materials had one-month decreases and 12-month increases: copper and brass mill shapes, -6.6% for the month and +13% for the year; diesel fuel, -5.9% and 16%; lumber and plywood, -4.9% and 18%; aluminum mill shapes, -3.7% and 11.5%; steel mill products, -1.3% and 30.5%; and asphalt paving mixtures and blocks, -0.5% and 7.4%.

The PPI for concrete products shrank 0.4% and 2.1%. The PPI for gypsum products rose 1.8% for the month and was unchanged from June 2009.

Some prices have slipped further since PPI data were gathered in mid-June.

“Nucor, the largest North American producer and fabricator of steel rebar,…notified customers late Monday that net transaction prices of rebar, merchant bar and structural products (angles, flats, rounds and channels) would decrease by $20 per short ton effective with shipments Tuesday, July 13, [matching a] price reduction announced by competitor Gerdau Ameristeel on July 6,” Platts Steel Market Daily reported on Tuesday.

The national retail average price of on-highway diesel fuel fell 2 cents per gallon this week to $2.90, down 22 cents from the year’s high on May 10, the Energy Information Administration reported on Monday.

Many state Departments of Transportation are projecting 30-50% declines in their highway construction budgets next year, officials reported this month at regional meetings attended by AGC.

Last year’s spending for many DOTs was at record levels as a result of federal stimulus funding and the lingering impact of bonding and other state funding initiatives since 2005.

However, with the stimulus funds having largely been spent and with state budgets being negatively impacted by the economic downturn, many state DOTs reported that their programs will drop significantly next year.

The DOT officials also reported that the uncertainty over federal surface transportation authorization legislation, which is 10 months late and unlikely to be enacted soon, will force them to focus their construction programs on maintenance and rehabilitation contract rather than expansion projects.

“Total state tax revenue in the first quarter of 2010 increased by 2.5% relative to a year ago,” the Rockefeller Institute of Government reported on Tuesday. “Total tax revenue declined in 33 states in the first quarter of 2010, down from 40 states during the fourth quarter of 2009.”

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