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Construction Cost Trends—November 2016

Posted: November 1, 2016 | Cost Trends

Source: US Department of Labor, Producer Price Index

Things are beginning to slow down a bit. Housing starts are faltering and public construction is flat. For the first time in the last few years the construction industry, which has been the darling of the economy, is reporting a downturn in growth. The business is still up but at a lesser rate of 5-6% as compared to 8-10% for last quarter. Let’s hope it’s just a temporary blip and not part of an upcoming new trend.

CONSTRUCTION MATERIALS

Construction material costs are still mixed. Lumber and concrete are up. Steel and pipe products (plastic and copper) are weak, while concrete pipe is up. Lumber has been both up and down, and currently appears headed into a 3-4% increase for the year. Steel is now showing some very small gains while copper remains sluggish. Overall, prices seem to reflect a more stable domestic market with less influence from foreign markets.

ADHESIVES AND SEALANTS

Same story, two years running. Adhesives and sealants both had slight losses and gains, trading in a very tight range, and are now heading down for the quarter. They seem to have a relationship to the price of oil, which is also down for this quarter. So as we’ve said before, these components most likely will follow the fortunes of the petroleum industry.

WOOD SIDING

After dramatic gains over the last few years, the price of wood siding began to moderate toward the end of 2014 and is now giving back some of its gains. It had been tracking the lumber industry as a whole, but now seems to be going its own way, having declined about 3% so far this year.

OPTIC CABLE

After being up in 2013, optic cable has been flat for the last 36 months. Since its peak in 2004, optic cable has decreased in price by almost 12% and things don’t seem to be changing. We can expect fiber optic cable to remain flat for the rest of the year.

GRANITE

Granite was languishing and showing no gains in spite of a recovering housing industry but now seems to be following the trends of construction. As the housing industry recovers and houses gain in price, accessories such as granite are increasingly called for by consumers.

RESILIENT FLOOR COVERING

Same story, four years running. Resilient flooring is still flat. Three years ago we thought that a rising petroleum price would fuel an increase in this component, but that didn’t pan out. Then oil went down and still nothing happened. Will it continue to stay flat? We will have to wait and see.

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