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Plunge continues for construction materials prices


Prices for construction materials fell for the sixth consecutive month in March and construction input prices were down 1.9 percent from the previous year, according to the producer price index report released by the U.S. Labor Department last week.

“Construction input prices have now slipped into negative territory on a year-over-year basis,” said Anriban Basu, chief economist with Associated Builders and Contractors Inc. “This is significant because it provides potential relief to profit margins that continue to be squeezed by the weak economy and fierce pricing competition between firms.”

“For the first time in recent memory, bids on many publicly financed projects are coming in below budgetary expectations, a reflection of retreating producer prices, as many firms search for revenues in the hope to rebuild their construction backlogs,” he added.

A 0.8 percent decrease in the price of fabricated structural metal products and a 3.5 percent plunge in softwood lumber prices are included in the overall 0.6 percent decline from February to March, and have contributed to the largest year-over-year decline in the nation’s wholesale prices since 1950.

“The implication from today’s data is that the recession remains ongoing and will continue to be reflected in producer prices in the months ahead,” Basu said.

“To many observers, it may be surprising that it required 16 months of recession to bring construction input prices down on a year-over-year basis,” he said. “However, this decline in prices is consistent with widely accepted theories of price behavior.”

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