The producer price index (PPI) for finished goods fell 0.1%, seasonally adjusted, in September but rose 8.7% over 12 months, the Bureau of Labor Statistics reported on October 15. The PPI for inputs to construction industries, a weighted average of all materials used in every type of cosntruction plus items consumed by contractors (such as diesel fuel), rose 0.5% for the month and 13% over 12 months. Once again, the largest increases by construction type were for inputs to highway and street construction, 0.7% and 22%; followed by other heavy construction, 0.2% and 17%; nonresidential building, 0.5% and 12.5%; multi-unit residential, 0.5% and 9.6%; and single-unit residential, 0.7% and 9.2%. PPIs for finished buildings generally rose less, suggesting that margins for contractors have narrowed. The index for new industrial buildings was flat for the month and up 4.9% over 12 months; warehouses, -0.2% and 4.2%; offices, 0.1% and 3.7%; and schools, 5.8% and 8.2%. PPIs for major inputs diverged greatly. The PPI for copper and brass mill shapes tumbled 9% for the month and 2.9% over 12 months; steel mill products plunged 3.6% in September but was 38% higher than a year before; diesel fuel, -1.4% and 39%; and asphalt paving mixtures and blocks, 3.1% and 51%. Some prices have plummeted since PPI data was collected in mid-September. “The CRB Index [which] consists of copper scrap, lead scrap, steel scrap, tin, and zinc [is] down 30% from its end-April peak,” the Institute of Scrap Recycling Industries (www.isri.org) reported in The Friday Report today. “This week ushered in the Chicago [Mercantile Exchange’s] steel futures contract, providing electronic trading that’ll match anonymous bids and asks for hot-rolled [HR] coil…the contract size is 20 tons with a minimum price fluctuation of $5 per ton…Moving beyond HR futures, in the “real” marketplace, latest price indicators placed Midwest HR coil around $815/ton, f.o.b. with lead times measured in days….At mid-week, we’re now hearing numbers closer to $760—some 30% lower than what was published back in May/June.” New construction starts fell 5% in September, McGraw-Hill Construction (MHC) reported on Thursday, based on information it collected. “Decreased activity was reported for both nonresidential building and nonbuilding construction, while residential building managed a slight gain from a very low amount. Through the first nine months of 2008, total construction on an unadjusted basis [was] down 14% from a year ago. If residential building is excluded, new construction starts during the January-September period of 2008 would be up 3% relative to last year….The start of four massive oil refinery additions which totaled a combined $14.3 billion helped to lift this year’s nonresidential total; if these projects are excluded, nonresidential building year-to-date would be down 4%. The largest declines in the January-September period were registered by warehouses, down 31%; and stores, down 26%. Office construction during this time slipped a modest 2%, while hotel construction still showed expansion, rising 17%. For the institutional categories, the January-September period included gains for healthcare facilities, up 12%; public buildings, up 9%; and schools, up 7%; while amusement-related projects were unchanged. Losing momentum relative to last year were transportation terminals, down 12%; and churches, down 17%....During the first nine months of 2008, nonbuilding construction maintained a 2% lead over last year. Much of the increase was due to the strength shown by electric utilities, up 46%. At the same time, only one public works category registered a year-to-date gain—river/harbor development, up 20%. Losing momentum during the January-September period were highways and bridges, with respective declines of 2% and 10%, dampened by the tighter fiscal climate and the diminished balance in the Highway Trust Fund. Also showing year-to-date declines were water supply systems, down 1%; sewers, down 9%; and site work, down 10%.” Separately, MHC predicted the level of construction starts in 2009 is expected to decline 7%, following a 12% decline predicted for 2008. “Single-family housing for 2009 will be down 2% in dollars, corresponding to a 4% drop in the number of units…. Multifamily housing will retreat 6% in dollars and 8% in units, after the sharp plunge witnessed during 2008. Commercial buildings will drop 12% in dollars and 15% in square feet, similar to the declines experienced in 2008. Stores and warehouses will continue to lose momentum, the office correction will be steeper, and hotel construction will finally pull back after its lengthy boom. Institutional buildings will slip 3% in dollars and 6% in square feet, as the financial crisis affects funding coming from states and localities. Manufacturing buildings will plunge 32% in dollars after an exceptional 2008 that was lifted by the start of several massive oil refinery expansion projects. Public works construction will fall 5%, given flat funding at the federal level combined with restraint by state and local governments. Electric utility construction will retreat 30% after surging 55% to a near record amount in 2008.” Lodging Econometrics (www.lodgingeconometrics.com) reported on Thursday, "The Total Construction Pipeline for the United States…as of the end of [the third quarter was] down, quarter-over-quarter, 4% and 6% [for hotel projects and rooms] respectively. Declines were modest in the Under Construction and Early Planning stages. Declines were significant in the Scheduled Starts in the Next 12 Months. A number of projects actually migrated backwards into Early Planning. Construction Starts…were down for the second quarter in a row, while Cancellations and Postponements of projects already in the Pipeline increased for the third consecutive quarter."