The producer price index (PPI) for finished goods was unchanged in December before seasonal adjustment (up 0.2%, seasonally adjusted) and up 4.4% from a year earlier, the Bureau of Labor Statistics (BLS) reported today. The PPI for inputs to construction industries, a weighted average of materials used in all types of projects plus items such as diesel fuel that are consumed during construction, rose 0.2% and 0.4%, respectively. For the first year since 2002, construction inputs rose less in price than the overall PPI or the consumer price index (CPI) for all urban consumers, which fell 0.2% in December, not seasonally adjusted, but rose 2.7% from a year ago. Despite the year-over-year moderation, some materials costs have begun to rise: copper and brass mill shapes, up 6.0% in December and 42% since December 2008; prepared asphalt and tar roofing and siding products, 5.2% and -3.4%, respectively; aluminum mill shapes, 2.1% and -7.5%; lumber and plywood, 2.0% and 0.5%; plastic construction products, 0.4% and -0.7%; and concrete products, 0.3% and -1.1%. In addition, the PPI for construction equipment climbed 0.1% and 0.9%. Two key input prices dropped for the month: diesel fuel, -5.0% and 22%; and steel mill products, -1.3% and -11%. Margins for contractors shrank, as indicated by a drop in the PPIs for new buildings and subcontractors' work on nonresidential buildings, which include overhead and profit as well as materials: industrial buildings, 0 and -4.3%; warehouses, 0.1% and -4.3%; schools, -0.1% and -2.4%; offices, -0.3% and -3.1%; concrete contractors, -0.1% and -1.3%; roofing, -0.1% and 0.6%; electrical, 0 and -3.1%; and plumbing, heating and air conditioning, 0 and 0.3%.
Some public officials have responded to lower building construction prices. "Montgomery Count 's government [in Maryland] would get a $4 billion jolt over the next six years under a capital spending plan detailed Friday by County Executive Isiah Leggett," the Washington Post reported on Saturday. "The proposal represents a nearly 7% boost in spending...With interest rates low and construction companies hungry for work, Montgomery officials said, the county should take advantage of the community's general affluence to press ahead with its capital priorities, especially those affecting education....Constructing a new Paint Branch [High School, which began this month], for example, is expected to cost $20 million to $30 million less than what was spent on a similar school that was built recently, schools officials said. The county can build an elementary school with the difference, they said." An AGC survey of nearly 700 contractors, released today, found 88% don't expect overall business conditions to improve until at least 2011. For 2010, 71% expect a drop in retail, warehouse and lodging work; manufacturing, 64%; nonhighway transportation, 48%; public building, 45%; hospital/higher education, 43%; water/sewer, 39%; power and highway, 38% each. 30% of respondents expect to add workers in 2010, while 27% expect layoffs (some firms said "both"). 46% said they plan to buy new construction equipment in 2010, down from 61% who did so in 2009; for used equipment, the figures were 34% and 50%. 81% say they cut profit margins for their 2009 bids and 11% are willing to take a loss. "Reports from the 12 Federal Reserve Districts indicated that while economic activity remains at a low level, conditions have improved modestly further, and those improvements are broader geographically than in the last report," the Fed said on January 13 in the latest Beige Book, a summary of informal soundings of businesses in each district. The districts are referred to by the name of the headquarters cities. "Ten Districts reported some increased activity or improvement in conditions, while the remaining two-Philadelphia and Richmond-reported mixed conditions....Residential construction activity remained at low levels in most Districts, although home building was reported to have increased in the Chicago and Minneapolis Districts...[Manufacturers'] capital spending plans remained more cautious. Only Boston and Philadelphia reported that firms were planning to increase capital spending in the current year. Cleveland, Chicago, and Kansas City reported expectations of continued modest spending." No detail was reported as whether the responses covered structures or only equipment and software. "Nonresidential construction activity was generally weak in all Districts, although St. Louis reported some gains in construction of education facilities and Cleveland reported a recent increase in nonresidential contracting." The American Institute of Architects reported today that its Architecture Billings Index, which measures the difference between the number of architecture firms who reported higher or lower billings compared to the prior month, inched up 0.6 to 43.4 in December, remaining below the breakeven 50 mark for the 23rd straight month. Among practice specialties, the sub-index for residential practices (mainly multifamily) reached 51 for the first time in two years but institutional (44), commercial/industrial (42) and mixed practice (38) stayed far below breakeven. The indexes are suggestive of future demand for building construction. The CPI for urban wage earners and clerical workers (CPI-W) rose 3.4% from a year ago, BLS reported on Friday. The CPI-W is often used for cost-of-living adjustments in construction and other industries. Industrial production (IP) at U.S. manufacturers slipped 0.1% in December and 1.9% from a year earlier, the Fed reported on Friday. IP of construction supplies sank 2.0% and 10%, respectively.- Industry Priorities
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