The producer price index (PPI) for finished goods jumped 1% in July, seasonally adjusted, propelled by a leap in energy costs, the Bureau of Labor Statistics (BLS) reported on Wednesday. From July 2004 to July 2005, the index climbed 4.6%. The “core” index, which omits food and energy costs, rose 0.4% for the month but only 2.8% over the past 12 months. The PPI for materials and components for construction slipped 0.2% for the month, bringing the year-over-year increase down to 4.5%. The moderation was caused by a 4% drop in prices for lumber and plywood, which are a very minor factor in nonresidential construction. In contrast, there were large rises in the PPIs for highway and street construction, 11.5%; other heavy construction, 8.9%; and nonresidential buildings, 6.8%. These increases were driven by 14% leaps for cement, ready-mixed concrete, copper and brass mill shapes, and nonferrous pipe, tube, and fittings; 13% for asphalt; and 11% for gypsum products. Worst of all was diesel fuel, up 54%, with a huge additional jump sure to come for August. The PPI for construction machinery and equipment rose 7.1%.
BLS introduced a new PPI for new warehouse building construction, the first of a planned series of PPIs for nonresidential construction. AGC members provided advice on how to specify the prototype warehouse, and general contractors provide BLS with confidential estimates each month of the overhead and profit they would charge to perform a specified portion of the construction. A cost-estimating firm provides data on labor and materials cost. (Further details and a timetable for future building PPIs are at www.bls.gov/ppi/ppinrbc.htm.) The index started with a value of 100 in December 2004. The July index was 106, indicating that the completed cost of a warehouse rose 6%. However, the index is not seasonally adjusted; generally such indexes should only be compared to the same month a year earlier.