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Loren Faulkner

Snapshot of Construction Materials and Fuel Pricing Increases
June 4, 2008

Kenneth Simonson, (simonsonk@agc.org) chief economist for the Associated General Contractors of America (www.agc.org) , always has a close monitoring of U.S. construction activity. His recent issue of DataDIGest (Vol. 8, No. 21) points out the unusual price jumps in construction materials and fuel, as shown below.

Any thoughts on when they may level out?

Price increases continue for construction materials. … Data DIGest readers have sent reports of immediate price increases for asphalt and aggregate; roofing products and metal wall panels, effective June 1-August 1; “a steel guardrail increase of 40% since February [and] rebar for concrete barrier jumped 23% in the last 30 days;” “a serious round of increases [for vinyl chloride resin for polyvinyl chloride (PVC) which] will impact pricing for plastic pipe, vinyl siding, vinyl flooring and vinyl window pricing.” On Tuesday, the July futures price of natural gas, the feedstock for PVC, hit the highest level since December 2005, following Hurricanes Rita and Katrina. There were also multiple reports of fuel surcharges. …

… the Energy Information Administration (EIA) reported that the national average retail price of highway diesel fuel dipped 1.6 cents per gallon from last week to $4.71, 68% above the year-ago level. Last year, diesel prices remained between $2.80 and $3 per gallon until late September, making it likely that surcharges based on year-ago prices will stay very high for the next several months.

The Institute for Supply Management reported…that purchasing executives with manufacturing firms reported price  increases in May for these items important to construction: aluminum, copper wire, diesel fuel, freight and fuel surcharges, and steel, including stainless and, structural. Steel was one of three items reported in short supply.

The Federal Highway Administration reported on May 23 that vehicle miles of travel fell 4.3% from March 2007 to March 2008, the largest drop since records began in 1942. The drop in gas purchases will lower gas tax receipts in federal and state highway trust fund accounts, imperiling funding for new highway construction contracts.

Posted by Loren Faulkner on June 4, 2008 | Comments (1)