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Rising Commercial Construction Responsible for Material Price Increases

Sept. 24, 2013
A slight housing upturn may also contribute.

Commercial and public construction trends are mixed. Public is down from last year, while commercial is up roughly 2%. A continued upturn is expected as long as increasing interest rates don’t stall the trend.

Construction material costs are still rising, but at a lower rate of just 2% for the year. Lumber prices are up compared to last year and had a spectacular run in the early spring, only to be tempered to an increase in the 6-8% range. Steel prices remain down to flat from last year. Copper and precious metals are down, so keep an eye out for an adjustment.

After a somewhat flat year in 2012, the price of rubber products has slowed even further to just 1%. This might be related to the price of crude, which may add some volatility to the price of rubber.

After steady big gains for eight years, price increases for sand and gravel moderated to 1-2%. The highway and public works portion of demand is waning, resulting in this dip, although commercial construction doesn’t seem to have much of an effect.

Millwork prices are outpacing other components by a bit in the 3-4% range. Following the housing upturn and increasing lumber prices, millwork is now up, but not at last year’s rate of 4-5%.

Same story for two years, clay products still appear to be trading in a very tight range and are up 2% since last year but flat over the last two years. An improvement in public works would positively affect this commodity, but there are no signs of it happening yet.

After six years of flat prices, limestone experienced an increase of 2-3%, which is likely attributable to the slight uptick in commercial building projects.

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Note: All data is based on indices rather than unit or quantity prices.
Source: U.S. Department of Labor, Producer Price Index

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