New Data Sees Construction Materials Price Jump

WEDNESDAY, JULY 15, 2020


Construction material prices have reportedly risen for the second time since the COVID-19 pandemic began, according to a recent Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics’ Producer Price Index.

The Bureau released the June data last week, which shows that nonresidential construction input prices rose by 2.3%—following a rise in prices of .8% in May.

The Data

Among the 11 subcategories, six experienced monthly increases, which include:

  • Fabricated Structural Metal Products increased by .6%;
  • Softwood Lumber increased by 11%;
  • Prepared Asphalt, Tar Roofing and Siding Products increased by 1.3%;
  • Crude Petroleum increased by 71.9%; and
  • Unprocessed Energy Materials increased by 16.8%.

Other stats include:

  • Plumbing Fixtures and Fittings decreased by 2.5%;
  • Iron and Steel decreased by .8%;
  • Steel Mill Products decreased by 1%;
  • Nonferrous Wire and Cable decreased by .5%;
  • Natural Gas decreased by 18.4%; and
  • Concrete Products remained stable.

“For many contractors, lack of demand for their services has emerged as the leading source of concern due to the COVID-19 pandemic, followed closely behind by a fear of inflation and a potential increase in materials prices,” said ABC Chief Economist Anirban Basu. “June’s PPI data indicate that they are right to be concerned.

“With global supply chains buckling and trade tensions elevated, materials prices are more likely to ratchet higher, even in the context of a global economy that will shrink markedly this year. While the recent rise in energy prices receives much of the attention, the price of softwood lumber is up nearly 19% over the past 12 months and was up 11% in June itself.”

The National Association of Home Builders also released lumber numbers earlier this month, noting that the Random Lengths Framing Composite Price hit $523 per 1,000 board feet for the week ending July 10, marking the first-time prices have topped the $500 level since July 2018.

The NAHB added that lumber prices in general have increased 50% since April 17 and it says that the primary drivers of the price increase include:

  • Mills closed in the spring due to stay-at-home and social distancing measures enacted by state and local governments;
  • When prices fell between March and April as a result of the COVID-19 pandemic, mills projected that housing would be adversely affected and therefore anticipated a large drop in demand;
  • Mills that remained operational substantially decreased capacity utilization;
  • Producers did not anticipate the massive uptick in demand from do-it-yourselfers and big box retailers during the pandemic;
  • Housing weathered the storm much better than most anticipated; and
  • DIY demand has not abated much as states reopen and construction demand has far surpassed lumber mills’ projections.

Other Numbers

In fact, the housing market demand is echoed in the Associated General Contractors of America’s latest numbers, which detailed that of the 158,000 workers who were added in June, most of those jobs gained were in residential construction.

“The gain in construction employment in June was concentrated in homebuilding, with scattered increases in nonresidential building, while heavy and civil engineering construction employment—the category that includes many highway and other infrastructure workers—shrank by nearly 10,000 jobs,” said Ken Simonson, the association’s chief economist.

Despite the addition of jobs in May and June, the AGC reports that employment remained 330,000 jobs—or 4.4%—below last year’s level. Other stats include:

  • Heavy and civil engineering construction segment lost 9,700 jobs in June and 60,100 jobs (-5.6%) over the year;
  • Nonresidential building construction employment increased by 13,100 for the month but declined by 47,000 jobs (-5.5%) over the year;
  • Employment among nonresidential specialty trade contractors rose by 71,300 in June but decreased by 140,000 (-5.2%) from a year earlier;
  • Residential building firms added 19,100 employees in June but lost 21,000 positions (-2.6%) over 12 months;
  • Residential specialty trade contractors added 64,100 employees last month but lost 63,000 workers (-3.0%) over the year; and
  • The industry’s unemployment rate in June was 10.1%, with 962,000 former construction workers idled.

View all of PaintSquare Daily News' COVID-19 coverage, here.

   

Tagged categories: Asia Pacific; Associated Builders and Contractors Inc. (ABC); Associated General Contractors (AGC); Building materials; EMEA (Europe, Middle East and Africa); Good Technical Practice; Industry surveys; Latin America; Market; Market data; National Association of Home Builders (NAHB); North America; Z-Continents

Join the Conversation:

Sign in to our community to add your comments.