Prices for building and construction materials in the United States are set to remain stable and may possibly decline in the near term a key industry commentator says.
Associated Builders and Contractors chief economist Anirban Basu says princes on construction materials continue to be ‘well behaved’ in the midst of a coordinated global economic slowdown as economies in China, India and Brazil ease back and ongoing economic issues in Europe continue.
“With the US economy growing less than two per cent, and with many other parts of the world experiencing lackluster growth, demand for productive input, including construction materials, remains soft,” Basu says, adding that the weakness in demand is especially apparent in the oil and crude petroleum category.
“Given the ongoing slew of bad economic news from around much of the world, materials prices are likely to remain stable over the months ahead,” he says.
Basu notes that is it possible that prices may spike on occasion, depending on market fluctuations. Even given the slow economic times, he says, investors will sometimes invest heavily in commodities instead of corporate bonds and equities in an effort to maximise returns, which leads to elevated commodities prices.
“Geopolitical events might also induce oil and other commodity prices higher during the months ahead,” he adds. “However, based purely on economic factors, demand for construction materials is unlikely to recover anytime soon, which may translate into additional price declines in the near future.”
Basu’s prediction follows the release of new statistics from the US Labour Department’s Producer Price Index (PPI) report, which showed that overall construction materials prices declined by 0.6 per cent last month and are up by just one per cent over the same period last year.
Leading the fall was crude energy prices, which declined by five per cent in May and are down 17.9 per cent when compared with the same period last year.
Outside of energy, prices for non-ferrous wire and cable fell 1.9 per cent and are down 4.6 per cent from 12 months ago, while global oversupply caused steel mill prices and iron and steel prices (down three and 2.3 per cent year on year, respectively) to each decline by 0.9 per cent in May.
On the other side of the equation, softwood lumber prices increased by 5.8 per cent during the month and are up 10.5 per cent compared with the same time last year while prices of asphalt, despite being down 4.5 per cent year on year, recovered slightly in May, rising by 1.8 per cent.