The producer price index (PPI) for finished goods rose 0.9% in December, seasonally adjusted, and 5.4% for the year, the Bureau of Labor Statistics reported on Friday. The monthly and annual gains were driven largely by energy costs. In contrast, the “core” index, which omits food and energy, rose 0.1% for the month and 1.7% for the year. The PPI for materials and components for construction (not seasonally adjusted) rose 0.5% for the month, 2.7% over the past three months, and 6.1% over 12 months. Among construction segments, the PPI for inputs for highway and street construction went up 14.1% over the year; other heavy construction, 8.8%; multi-unit residential, 7.6%; single-unit residential, 6.9%; and nonresidential buildings, 7.4%. The only PPI for finished buildings, covering new warehouses, rose 7.6%. PPIs for specific construction materials showed large variation between three- and 12-month figures and among various materials. For instance, the price of #2 diesel fuel rose 46% over 12 months despite a 7% decline from September to December. At the other extreme, steel mill product prices fell 3.6% last year but moved up 5.5% in the past three months. The largest three-month increases were for rubber and plastic plumbing products, +30%, and copper and brass mill shapes, +16%.
Cement prices, which rose 0.7% from September to December and 11.7% over 12 months, may moderate as a result of recent developments. The International Trade Administration of the Commerce Dept. announced (www.ita.doc.gov/media/FactSheet/0106/cement_011206.html) as the result of an annual review that it was lowering the antidumping duty on Mexican cement from 54.91% to 42.26%, retroactive to August 1, 2003. More significanly, long-running negotiations between Commerce and the Mexican government appear to be close to conclusion; the Southern Tier Cement Committee issued a press release on Thursday that said the potential agreement would sharply reduce tariffs, open the Mexican market to imports, and prevent a surge of imports from Mexico into the southern U.S. On January 6, the U.S. International Trade Commission announced that it would conduct a full “sunset” review to determine whether revocation of the antidumping order “would be likely to lead to continuation or recurrence of material injury within a reasonably foreseeable time.” U.S. Geological Survey data (www.usgs.gov) released on January 6 show that domestic production of cement for the first 10 months of 2005 was unchanged from the same period of 2004 but shipments climbed 5.5%; the difference was made up by imports, which increased 25.5%. The fastest-growing source of cement imports was China, now second after Canada. Greece, Thailand, South Korea, and Venezuela followed, with Mexico seventh. Presumably, lower duties would make Mexican cement cheaper than some other imports.
The Construction Labor Research Council (CLRC) reported in a yearend summary of collective bargaining settlements that negotiations completed in 2005 produced an average first-year increase in wages and fringe benefits of $1.53 or 3.9%, compared to 3.8% in 2004 and 4.3% in 2003. The average second-year increase in newly negotiated multi-year agreements was $1.81 or 4.2%, and the average third-year increase was $1.91 or 4.2%, the first time since 2001 that second-year and third-year increases have exceeded 4%. Increased contributions to health-and-welfare funds accounted for a significant portion of the total increase amounts, CLRC found, with an average allocated amount of $.78.
The Federal Emergency Management Agency on Thursday raised its estimate of the number of evacuees from Hurricane Katrina by a third, to roughly two million. This has several implications for construction: more demand for housing, infrastructure, retail and consumer services in areas where evacuees have relocated, and fewer workers left in the hurricane zone to perform construction or provide other services that support construction (or basic living). For instance, an article in the January 13 Memphis Business Journal found that several local contractors in different market segments reported no sign that construction workers were leaving the area for the Gulf. Mixed signs about the recovery appeared this month. The Louisiana Dept. of Transportation and Development announced that the westbound span of Interstate 10 had been reopened across Lake Pontchartrain, nine days ahead of schedule. But the next day the agency closed both spans to oversize and overweight vehicles, leaving longer routings for some construction equipment and components. A commission appointed by New Orleans Mayor Ray Nagin presented its rebuilding plan, sparking strong opposition from some residents and suggesting that rebuilding will be very drawn out and contentious.