Article source: ConstructConnect
Top of mind for economic analysts these days is the question of how rapidly prices (or costs, from a different perspective) are moving, and in what direction. The construction sector, mainly on the residential side, has been plagued much of this year by extraordinarily large climbs in prices for forestry products. July’s Producer Price Index (PPI) results from the Bureau of Labor Statistics (BLS) show an abatement in this problem. Softwood lumber’s July PPI was -29.0% month to month and -16.3% over the latest three months. Nevertheless, it was ahead by a mighty +45.0% year over year; but in May, it had been +154% y/y.
For some other key material inputs, though, a letup in price/cost advance remains elusive. The ‘hot rolled steel bars, plates and structural shapes’ PPI is +6.0% m/m, +10.5% over the latest three months, and +43.7% y/y. The ‘aluminum sheet and strip’ PPI is +2.3% m/m, +7.8% over the latest three months, and +41.2% y/y.
Without further ado, therefore, let’s delve into some other pricing/costing issues, plus discuss other key statistical information appearing in recent public and private sector data releases.
(1) While there were some mild pullbacks in the year-over-year U.S. inflation numbers in July, the figures stayed inordinately high. The ‘core’ subset of the ‘all items’ Consumer Price Index (CPI) eased a little to +4.3% y/y from +4.5% y/y in June. The ‘energy’ sub-index retreated to +23.8% from +24.5%. Gasoline downshifted to +41.7% from +45.1%. Nevertheless, the ‘all items’ index in July stayed the same as in the prior month at +5.4% y/y. The Federal Reserve’s target for ‘all items’ inflation, under normal circumstances, is +2.0%. A theme that is likely to keep repeating in the months ahead is that normal cyclical recovery patterns won’t necessarily apply when exiting a pandemic.
