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By: Alex Carrick on July 21st, 2021

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PPI Measures of Construction Material Costs Are Still Shouting Warnings

Economic News

This article focuses on the latest U.S. building material cost increases as laid out in the Producer Price Index data set compiled and published by the Bureau of Labor Statistics.

Shockingly High Material Cost Hikes Graphic

The PPI series measures prices for goods as they leave the factory gate. They’re not necessarily as up-to-the-minute relevant as some other measures. For example, there have been sighs of relief in the marketplace because of recent perceived price softening in the forestry sector. The moderation relates to transactions on commodity exchanges covering ‘spot’ and ‘futures’ prices.

Therefore, some easing may be imminent, and again especially relating to lumber and its byproducts, but there are still numerous cost hikes among other construction material inputs to raise an eyebrow or two.  

Prices for steel, aluminum, and copper products, along with gasoline and diesel fuel, have all been climbing significantly higher, to some extent under the cover of the more attention-grabbing advances in forestry products.

In any event, Graph 1 shows the dilemma faced by contractors. In hopes of being awarded work, they’ve been keeping their bid prices low, while their expenses have been increasing alarmingly. 

Appearing below are 30 graphs and a detailed table. 28 of the graphs are in clusters of four each. The graphs and table feature the latest monthly updates of what has appeared before at ConstructConnect’s website.

Recently, many of the slopes in the cluster graphs have taken on a steepness rarely, if ever, seen before.  

Graph 1: U.S. Construction Bid Prices vs Material Input Costs
U.S. Construction Material Cost Changes
Data source: Producer Price Index series (BLS).
Chart: ConstructConnect.
Graph 2: U.S. Construction Material Cost Changes
From Producer Price Index (PPI) Series - June 2021
U.S. Construction Material Cost Changes
Data source: Bureau of Labor Statistics (BLS).
Charts: ConstructConnect.
Graph Cluster 1 - Forestry Products: U.S. Construction Material Costs (1) - From Producer Price Index (PPI) Series
U.S. Construction Material Costs (1) - From Producer Price Index (PPI) Series
The last data points are for June 2021.
Data source: U.S. Bureau of Labor Statistics (BLS), Producer Price Index (PPI) series, not seasonally adjusted (NSA).
Charts: ConstructConnect.
Graph Cluster 2 - Steel Products: U.S. Construction Material Costs (2) - From Producer Price Index (PPI) Series
U.S. Construction Material Costs (2) - From Producer Price Index (PPI) Series
The last data points are for June 2021.
Data source: U.S. Bureau of Labor Statistics (BLS), Producer Price Index (PPI) series, not seasonally adjusted (NSA).
Charts: ConstructConnect.
Graph Cluster 3 - Cement: U.S. Construction Material Costs (3) - From Producer Price Index (PPI) Series
U.S. Construction Material Costs (3) - From Producer Price Index (PPI) Series
The last data points are for June 2021.
Data source: U.S. Bureau of Labor Statistics (BLS), Producer Price Index (PPI) series, not seasonally adjusted (NSA).
Charts: ConstructConnect.
Graph Cluster 4 - Base Materials: U.S. Construction Material Costs (4) - From Producer Price Index (PPI) Series
U.S. Construction Material Costs (4) - From Producer Price Index (PPI) Series
The last data points are for June 2021.
Data source: U.S. Bureau of Labor Statistics (BLS), Producer Price Index (PPI) series, not seasonally adjusted (NSA).
Charts: ConstructConnect.
Graph Cluster 5 - Energy Products: U.S. Construction Material Costs (5) - From Producer Price Index (PPI) Series
U.S. Construction Material Costs (5) - From Producer Price Index (PPI) Series
The last data points are for June 2021.
Data source: U.S. Bureau of Labor Statistics (BLS), Producer Price Index (PPI) series, not seasonally adjusted (NSA).
Charts: ConstructConnect.
Graph Cluster 6 - Accessories & Arterial: U.S. Construction Material Costs (6) - From Producer Price Index (PPI) Series
U.S. Construction Material Costs (5) - From Producer Price Index (PPI) Series
The last data points are for June 2021.
Data source: U.S. Bureau of Labor Statistics (BLS), Producer Price Index (PPI) series, not seasonally adjusted (NSA).
Charts: ConstructConnect.
Graph Cluster 7 - Equipment: U.S. Construction Material Costs (7) - From Producer Price Index (PPI) Series
U.S. Construction Material Costs (5) - From Producer Price Index (PPI) Series
The last data points are for June 2021.
Data source: U.S. Bureau of Labor Statistics (BLS), Producer Price Index (PPI) series, not seasonally adjusted (NSA).
Charts: ConstructConnect.
Table 1: U.S. Producer Price Index (PPI) Results
% Change in the April 2021 Index from:
  3 Years   1 Year    6 months   3 months   1 month 
  Ago   Ago   Ago   Ago   Ago
                   
Final Demand/Service/Commodity/Energy/Input:                  
Final Demand Construction 11.6%   3.5%   3.3%   2.4%   0.7%
   New warehouse building construction 11.0%   4.0%   3.8%   3.6%   0.7%
   New school building construction 10.9%   1.5%   1.6%   1.1%   0.1%
   New office building construction 12.6%   5.1%   4.6%   1.9%   0.5%
   New industrial building construction 12.0%   2.1%   1.4%   1.1%   0.3%
   New health care building construction 11.9%   4.0%   4.4%   4.1%   0.9%
Architectural & engineering services 5.6%   3.2%   1.5%   0.6%   0.1%
Construction machinery & equipment 11.2%   3.2%   3.1%   1.8%   0.4%
Asphalt 2.6%   65.1%   58.1%   11.1%   10.9%
Plastic construction products 23.5%   21.8%   15.9%   9.5%   3.1%
Softwood lumber 102.4%   125.3%   62.7%   25.6%   -2.1%
Hardwood lumber 17.6%   37.4%   24.6%   7.5%   0.0%
Millwork 26.0%   23.0%   15.1%   9.9%   3.0%
Plywood 85.9%   114.5%   77.4%   44.5%   15.2%
Particleboard & oriented strand board (OSB) 108.6%   132.2%   59.9%   36.7%   11.7%
Gypsum 11.9%   18.0%   15.1%   9.6%   3.3%
Insulation materials 12.8%   10.1%   10.5%   5.0%   2.4%
Construction sand, gravel & crushed stone 13.3%   4.1%   3.7%   1.7%   0.2%
Cement 6.8%   3.8%   3.3%   2.2%   1.8%
Ready-mix concrete 8.3%   3.1%   3.4%   2.3%   0.8%
Precast concrete products 15.8%   7.7%   6.0%   3.8%   0.2%
Prestressed concrete products 13.4%   8.6%   11.8%   9.2%   6.7%
Brick (clay) 8.4%   5.7%   2.8%   1.9%   -0.1%
Coal -3.4%   1.3%   2.8%   1.9%   0.3%
Iron ore 11.1%   10.2%   5.1%   4.2%   3.5%
Iron & steel scrap 32.0%   90.7%   35.0%   12.6%   9.9%
Steel bars, plates & structural shapes 20.0%   35.6%   33.6%   9.6%   3.5%
Steel pipe & tube 26.0%   36.9%   30.6%   14.7%   4.0%
Fabricated structural metal products 26.9%   25.0%   23.1%   14.0%   5.7%
Prefabricated Metal Buildings 31.1%   34.3%   23.0%   10.4%   6.0%
Aluminum mill shapes 5.2%   33.2%   19.8%   13.2%   2.5%
Flat glass 8.6%   6.5%   4.1%   3.3%   2.5%
Paints, architectural coatings 16.7%   5.5%   5.5%   3.2%   0.7%
Lighting fixtures 12.6%   3.9%   3.6%   2.5%   0.3%
Plumbing fixtures & fittings 9.7%   2.7%   2.1%   0.9%   0.5%
Elevators & escalators 10.2%   3.7%   3.6%   2.4%   1.1%
Heating equipment 16.5%   9.8%   9.5%   7.0%   3.0%
Air conditioning equipment 14.0%   8.0%   6.9%   3.5%   1.8%
Copper wire & cable 27.4%   39.8%   19.3%   10.9%   1.8%
Regular gasoline unleaded -0.3%   83.4%   60.4%   9.3%   0.0%
Diesel Fuel 19.9%   127.4%   39.5%   2.9%   -3.3%
Inputs to new construction 24.7%   26.1%   18.0%   10.5%   3.8%
Inputs to new residential construction 27.5%   28.3%   20.0%   12.1%   4.5%
Inputs to new non-res construction 21.8%   23.5%   16.1%   8.9%   3.1%
   Inputs to commercial construction 21.0%   22.3%   15.2%   8.8%   3.1%
   Inputs to healthcare structures 22.1%   22.8%   15.5%   9.0%   3.2%
   Inputs to industrial structures 21.4%   19.7%   13.2%   7.5%   2.9%
   Inputs to highways & streets 17.4%   21.6%   15.4%   8.3%   2.9%
   Inputs to power & communication structures 20.9%   24.3%   16.9%   9.4%   3.1%
   Inputs to educational & vocational structures 23.7%   23.8%   15.9%   9.3%   3.1%
Construction materials (PPI 'Special Index') 31.6%   34.1%   27.0%   14.3%   3.8%
The 'final demand' indices (at top) reflect the prices paid by owners for the construction of projects. They include material, labor & markups.
The 'service', 'commodity' and 'energy' indices (in the middle section of the table) are based on 'factory-gate' sales prices.
The 'input' indices (at bottom) reflect costs faced by contractors. They exclude capital investment (i.e., machinery & equipment), labor & imports.
The 'input' indices are built up from the 'service' (design, legal, transport & warehousing, etc.) 'commodity' and 'energy' indices.
Data source: Producer Price Index (PPI) series from Bureau of Labor Statistics (BLS).
Table: ConstructConnect.

About Alex Carrick

Alex Carrick is Chief Economist for ConstructConnect. He has delivered presentations throughout North America on the U.S., Canadian and world construction outlooks. Mr. Carrick has been with the company since 1985.