Construction materials prices are finally slowing down due to declines in energy prices. According to Reed Construction Data, the sluggish residential and nonresidential construction activity is keeping building materials inflation low. RCD’s report said, “This does not mean that prices are necessarily down from a year ago. However, overall building materials inflation for the past year has been roughly in line with general U.S. inflation. For the next several months, building materials prices are likely to continue to move in line with overall inflation.”

However, if construction activity suddenly picks up, building materials prices would be affected. The seasonally adjusted Producer Price Index for materials and components used in construction only rose 0.3% in April after a previous 0.2% in March. The index was up 2.9% from April 2011and up 7.4% since April 2009. Prices for raw materials used in construction or to produce products used in construction rose at a faster pace, up 0.9% in April, up 3.8% y-o-y.

Recent economic reports indicate that the U.S. economy is on a slow, but steady growth path. RCD projects rising construction activity; however, they report that “Faster than projected sustained U.S. economic growth (3% or higher at an annual rate) will accelerate commercial construction activity and push materials price inflation higher than general inflation. This seems unlikely to happen before the latter part of this year or early next year.”

Volatile energy prices are the main concern as extreme increases could hurt consumers and the economy, according to RCD.

Source: Reed Construction Data