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What’s It Cost? – June 2015

Influences on the cost of construction are beginning to put upward pressure on pricing. A bounce back in oil prices since the end of winter and accelerating wages are creating month-over-month increases. Because of the deflationary pressures in the second half of 2014 as oil prices plunged, most year-over-year changes are still small or negative.

The Bureau of Labor Statistics (BLS) reported June 12 that the producer price index (PPI) for final demand increased 0.3 percent, not seasonally adjusted (0.5 percent, seasonally adjusted), in May but declined 1.1 percent over 12 months. The PPI for final demand construction rose 0.3 percent in May and 2.0 percent over 12 months. The overall PPI for new nonresidential building construction climbed 1.8 percent since May 2014.

Increases in the indexes were primarily driven by rebounds in energy costs and wages, which make up 25 percent of the index for services related to construction put-in-place. Energy costs jumped 12 percent from April to May, although the price was down 36 percent year-over-year. Excluding energy, the cost of all goods used in construction actually fell three percent compared to May 2014. Significant declines were registered for steel – down 2.0 percent from April and 11 percent for the year – and lumber and plywood – down 2.4 percent and 6.9 percent respectively. Cement prices jumped 7.5 percent year-over-year and concrete moved with it, rising 4.9 percent since May 2014.

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  • Bob Biehl
  • Director, Assurance & Business Advisory Services
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