Construction Materials Prices Drop

Yes, as construction continues to slow in most all areas of the economy, materials prices also continue to fall. They were down 2.5% in the month of December 2008 from the previous month according to the Jan. 15th PPI report. This represents the third straight month that construction prices have fallen, with the total 4th quarter declining 8.3%. This is a continued sign of the turmoil being faced in the construction industry.

Prices for fabricated structural metal products, plumbing fixtures and fittings, and nonferrous wire and cable were all down. Prices for fabricated ferrous wire products, softwood lumber, Asphalt felts and coatings all dropped also.

What does all of this mean at this point? Well, there is good news and bad news in these numbers. Obviously, the good news is that construction materials prices are dropping, which at some point increases the demand for most construction companies to start building inventory again. The bad news is that right now the price drops are a function of declining worldwide demand for construction products. This process still probably has a ways to go to work itself out, maybe the rest of 2009. But one very positive variable is the upcoming stimulus package being discussed in Washington. This stimulus package involves a lot of capital being potentially allocated to construction spending.

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