Construction inputs costs diverge; Gulf recovery is slow; multifamily outlook is mixed
Wide differences have appeared in recent weeks in the costs for construction inputs such as fuel, freight, plastics, steel and other metals. Diesel fuel prices have been nearly stable for almost three months. The Energy Information Administration announced that the national average price of on-highway diesel fuel was $2.48 per gallon, 69 cents less than in October, but 49 cents (25%) higher than a year ago. Contractors use diesel fuel to run offroad equipment and construction trucks; they also pay fuel surcharges on deliveries of materials and haulage of dirt and debris.
Apart from the surcharges, “Many large motor carriers, flush from a successful 2005, said they expected the combination of strong freight demand and a robust economy to push rates up between 4% and 6% this year, marking the third straight year of increases,” the trucking newspaper Transport Topics (link below) reported on February 7. In contrast, the price of natural gas futures has fallen almost continuously in that span, dropping to a six-month low of less than half the record set in early December. Natural gas is the principal feedstock for polyvinyl chloride (PVC) pipe, insulation, roofing materials, and membranes and is used as a heat source for glass, brick and other manufacturing.