MATERIALS: Costs drop for third consecutive month, but relief appears to be over

The cost of key construction materials dropped for the third consecutive month in July, pushing down year-over-year prices for the first time since 2009, according to an analysis of producer price index figures released Aug. 14 by the Associated General Contractors of America. However, association officials warned that recent spikes in diesel fuel and steel prices may drive up the cost of construction again, and they urged lawmakers to invest in needed infrastructure projects promptly while prices remain low.

“This price decline may be the last, given the large jumps in diesel fuel and steel prices that have occurred or been announced since the Labor Department collected this producer price data in mid-July,” said Ken Simonson, the association’s chief economist. “If economic growth accelerates, we are likely to see an end to discounted prices for construction activity.”

The producer price index for inputs to construction—covering materials that go into every type of project, plus items consumed by contractors such as diesel fuel—decreased 0.7% in July and 0.6% from a year earlier, Simonson noted. The year-over-year decline was the first since November 2009, he added.

Simonson observed that falling prices for several key construction materials produced the latest monthly and year-to-year decreases. The price index for steel mill products tumbled 2.8% in July and 5.9% from a year ago. The index for diesel fuel fell 0.2% in July and 9.3% over 12 months.