Costs Rise As Housing Starts Slow

The aggregate price of inputs to construction industries increased 6.5 percent over the past 12 months, according to the Bureau of Labor Statistics March 2008 Producer Price Index Data.
The rise was more rapid than the previous 12-month period ending March 2007, when construction input prices went up 3.9 percent.
Construction inputs include materials such as cement, lumber, steel and diesel fuel.
Construction inflation remains less pronounced than during the 2004-2005 period, when overall 12-month construction price increases routinely approached 10 percent.
In terms of one-month percent change, the overall price of construction inputs rose 2.1 percent in March, which represents the largest one-month increase this decade. The overall PPI rose 1.1 percent in March and 6.9 percent over the past 12 months.
According to a statement issued by the Associated Builders and Contractors, the news of a rapidly rising PPI is not good for the construction industry.
“Previous producer price increases were sharper than those recorded in March, but also took place during a time of economic expansion,” the statement read.
“With the economy now likely in recession and credit markets still in turmoil, customers will be particularly sensitive to price, which will make it difficult for ABC members and others to pass along materials price increases to their clients.”
New home construction, is at its lowest level in 17 years, according to a report released April 16 by the U.S. Commerce Department.
In March, privately-owned housing starts were running at a seasonally-adjusted annual rate of 947,000. That represents a staggering 36.5 percent decline from one year ago. Overall, housing starts are at their lowest level since March 1991, when the US economy was mired in a recession.
Last month, privately-owned housing starts were down 11.9 percent from February’s revised estimate of 1.075 million units.
Two-thirds of the monthly decline in housing starts were attributable to a pronounced drop-off in multifamily starts, which were down 24.6 percent in March compared to February.
Single-family starts totaled 680,000 units in March, down roughly 5.7 percent from one-month prior. Starts in January and February were revised upward by a total of 22,000 units.
The Midwest reported the largest one-month decrease in total privately-owned housing starts, with starts down 21.4 percent in March. The South followed with a 12.6 percent decline. The Northeast and West experienced a drop in housing starts of 8.5 percent and 5.7 percent, respectively.

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