Construction starts hold steady in February; materials prices outrun overall PPI again
Two private-sector reports suggest construction activity held steady in February. McGraw-Hill Construction reported today that the value of new construction starts in February was unchanged from January, seasonally adjusted. For the first two months of 2006 combined-a better measure given the extremely mild weather in January that allowed for more starts than usual-total construction was 9% higher than in the same months of 2005. Nonresidential building starts rose 14%, residential building 8%, and nonbuilding 4%. Similarly, the American Institute of Architects reported on Friday that its monthly survey revealed no change from January to February in billings at 300 architectural firms.
Part of the increase over 2005 is attributable to higher construction materials costs. On March 21, the Bureau of Labor Statistics (BLS) reported that the producer price index (PPI) for finished goods fell 1.4% from January to February, seasonally adjusted, and climbed 3.7% over the past 12 months. The “core” index, which omits energy and food costs, rose only 1.7% over the 12-month span. But the PPI for construction materials and components was up 0.4% for the month and 5.6% for the 12-month period. The PPI for materials used in highway and street construction jumped 12.1%, while indexes for single- and multi-unit residential, nonresidential, and other heavy construction rose 6-7%. Among specific construction inputs, notable 12-month increases included copper and brass mill shapes, 36%; diesel fuel, 31%; asphalt 27%; gypsum products, 25%; plastic construction products, 22%; and concrete products, 9.3%. The overall construction totals were held down by declines in steel mill products, -5.5%, and lumber and plywood, -2.7%.
