Producer Price Indexes (PPIs) for Construction Materials and Components - January

Date: 2 March 2009

The producer price index (PPI) for finished goods climbed 0.9% in January, not seasonally adjusted (0.8%, seasonally adjusted), but fell 1.0% compared to January 2008, the Bureau of Labor Statistics (BLS) reported on Thursday.

The PPI for construction inputs fell 0.3% for the month, not seasonally adjusted, and rose 1.8% from a year earlier. The PPI for highway and street construction inputs rose 0.4% in January and fell 1.4% over 12 months. PPIs for other segments fell for the month but rose from a year before: other heavy construction, -0.4% and 0.1%; nonresidential buildings, -0.3% and 1.2%; multi-unit residential, -0.1% and 2.2%; and single-unit residential, -0.4% and 4.0%. The divergent results reflect differing trends in prices of individual materials. There were substantial increases in January in the prices of ready-mixed concrete, 2.3% for the month and 5.7% over 12 months, and its ingredients-cement, 1.2% and 0.9%, and construction sand/gravel/crushed stone, 1.3% and 6.0%. There were also increases for gypsum products, 1.0% and 8.7%; construction machinery and equipment, 0.4% and 4.9%; and plastic construction products, 0.3% and 3.5%. Prices fell in January for aluminum mill shapes, -7.6% and -12%; asphalt paving mixtures and blocks, -6.2% and 23%; steel mill products, -5.8% and -2.2%; copper and brass mill shapes, -5.4% and 19%; and diesel fuel, -4.3% and -41%.

The consumer price index (CPI) for all urban consumers rose 0.4% in January, not seasonally adjusted (0.3%, seasonally adjusted), but was unchanged over a 12-month period for the first time since 1955, BLS reported on Friday. The CPI for urban wage earners and clerical workers (CPI-W) which is used to adjust many labor contracts in construction and other industries, fell 0.5% over the past 12 months.


The value of new construction starts fell 3% in January, McGraw-Hill Construction (MHC) reported on Thursday, based on its own data compilation. "The housing sector continued its extended slide, and it was joined by a further loss of momentum for nonresidential building. At the same time, nonbuilding construction in January cushioned the total construction downturn relative to December, with gains reported for nonbuilding’s public works and electric utility segments. ‘The construction starts data showed a declining trend over the course of 2008, and this has continued through the first month of 2009,’ stated Robert A. Murray, vice president of economic affairs for [MHC]. ‘January’s pattern was similar to what occurred during 2008-more weakness for housing, combined with a mounting loss of momentum for commercial building. At the same time, public works has been able to hold up relatively well, even with the erosion in state and local finances.’ Nonresidential building retreated 11% in January, with offices -5%; stores, -21%; hotels, -33%; and warehouses, -54%." Transportation terminal work "soared 515%. This reflected the start of two large airport terminal projects-a massive $1.2 billion project in Las Vegas and a $316 million project in Sacramento….For the 12 months ending January 2009, total construction was down 19%," with nonresidential building, -9%; building, -40%; and nonbuilding construction, +5%.


The downturn in retail construction seems likely to continue. "Lowe’s said it is curtailing new-store expansion in light of the weak economy," the Wall Street Journal reported on Saturday. "It now expects to open 60 to 70 stores this year, compared with a forecast of up to 85 new stores that the…chain outlined in September. It opened 115 stores last year." On January 27, the Journal reported, "Home Depot said it is shuttering its 34 Home Expo Design Centers….Home Depot plans to open 12 of its core home-improvement stores [in 2009], down from the 30 to 40 stores it previously expected." On January 29, USA Today reported, "Starbucks will close…about 200 [stores] in the U.S. These closings are in addition to the 600 [announced last fall]. Starbucks will open 140 stores-60 fewer than its previous target of 200." Chico’s FAS announced it would close 25 stores; Ruby Tuesday said it would close 40 restaurants early in 2009 and 30 more over the next several years. In contrast, Hennes & Mauritz "said it plans to open 225 stores this year, including its first branch in Beijing," the Journal  reported last month.


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