Building Materials Price Inflation: April 2001

Construction material prices were lower — on average — over the first-third of 2001 than during the first four months of last year.

The Labor Department's construction materials composite price index was unchanged between March and April, and has risen in only one of the past 13 months. Consequently, the composite construction materials inflation measure has now fallen to a level 1.8% lower than where it stood in April 2000.

Lumber prices increased slightly (+0.3%) for the third month in a row during April, following eleven consecutive months in which prices eased. However, average lumber prices this April remained 8.9% lower than where they stood at this time last year.

After recording a price increase during March — its first in the past year — average gypsum product prices dipped by 2.9% during April. Average prices in this product sector were 28.9% lower in April 2001 than during April 2000.

Over-the-month price increases were also recorded for ready-mixed concrete (+0.3%), flat glass (+0.5%), ceramic floor and wall tile (+0.2%), and asphalt/tar shingles (+0.6%).

However, there were enough construction materials and products that recorded price declines over the month to offset these increases, and to keep the composite index level stable during April.

In addition to the sharp drop in gypsum product inflation, prices were lower in April than in March for structural metal used in buildings (-0.3%), lighting fixtures (-0.3%), unitary air conditioning units (-0.7%), plumbing fixtures and fittings (-1.0%), and paving asphalt (-1.3%).

Overall construction materials inflation has run at about 1% during the past two years. Manufacturing capacity (both domestic and foreign) should be more than sufficient to supply all of the product that the slowing construction industry will demand over the balance of 2001. Consequently, we're forecasting an even smaller increase (+0.3%) in the construction materials composite index this year than over 1999-2000.

Construction materials product price just isn't much of a problem these days. No high-volume product category recorded inflation of even 3% through the first quarter of this year, and more materials cost less this April than last April than moved up in price over the year. With demand from both residential and nonresidential building sectors expected to moderate throughout 2001, average prices for construction materials/supplies shouldn't rise very much. We're forecasting inflation of only 0.3% this year, rising to 1.7% during 2002.

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