January 11-17, 2006 - Factory output grows; construction input prices outstrip PPI; relief possible on cement
Industrial production (IP) at mines, utilities, and factories rose 0.6% in December, seasonally adjusted, and 2.8% since December 2004, the Federal Reserve Board announced this morning. Output of construction supplies dropped 0.9% for the month but rose 5.2% for the year. Manufacturing IP climbed 0.2% for the month and 3.8% for the year, while capacity utilization in manufacturing reached 79.6% of capacity in November and December, up from 78.3% in December 2004. Together, rising output and capacity utilization in manufacturing imply further demand for factory construction.
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%.