The December Bureau of Labor Statistics producer prices index, (PPI) for all commodities was up 0.3% month on month, (m/m). On a 12 month year on year, (y/y) comparison, the all commodities PPI rose 4.5%. The all commodities index has moved higher in each of the last 13 months on a y/y basis.

Figure 1 shows the 3MMA, materials and components PPI for construction from 2000 to December 2017. The material and construction components PPI increased by +0.8% over three months, +1.6% over six months, +3.2% over 12 months and by +4.3% over a 24 month interval. On a rolling 12 month basis, the material and construction component PPI has advanced for 18 consecutive months.

Figure 2 shows the 3MMA, material and components for non-residential construction PPI from 2000 to December 2017. The non-residential construction PPI rose increased by +1.1% over three months, +2.4% over six months, +4.4% over 12 months and by +5.4% over a 24 month timeframe. In a November report from the American General Contractors, it highlights that wallboard is on partial allocation and that buyers expect to see a double digit price hike this month. Other material suppliers have announced significant price hikes to include concrete, steel studs, wire mesh, insulation and flooring products.

The non-residential construction PPI has been increasing at faster clip than the overall commodities index over the past 12 months. On a rolling 12 month basis, the material and construction component PPI has increased in each of the past 14 months.

Table 1 charts construction steels and its competing materials. The overall number for all materials and components of construction was up 0.8% over the past three months and up 3.2% y/y. According to the BLS, structural steel shapes prices are moving-up, advancing 1.3% over 3 months and by 8.7% y/y. The PPI for pipe, tube and hollow structural shapes was flat over over 3 months, and was up 8.4% y/y. The PPI for fabricated steel for non-residential construction fell 4.5% over three months and was lower by 0.7% on a 12 month basis.

Fabricated structural steel for bridges was flat over the last three months and was higher by 4.9% over 12 months. Fabricated bar joist and fabricated rebar, (grouped together in one category) fell 3.7% over 3 months but rose 0.3% on a y/y comparison. Prestressed concrete bridge beams managed a 0.5% gain 3 months y/y and were higher by 4.0% when compared to December of 2016. Compared to 24 months ago, prestressed concrete bridge beams are up 27.9%. Softwood lumber prices are higher by 2.7% over the last 3 months and by 15.3% on a y/y comparison. Wood trusses were also higher in price, up 4.5% and 13.5% for 3 and 12 month comparisons. This indicated that residential construction is gaining strength.

The PPI for non-residential structures moved-up 1.0%, 3 months y/y and by 4.2% on a y/y comparison. Commercial building exhibited the strongest price gains, rising 1.0% over three months and by 4.2% over 12 months and 5.6% over two years. Office structures were flat 3 months y/y and up by 2.1%, 12 months y/y. Industrial structures were also flat 3 months y/y but were up by 1.8%, on a 12 month y/y comparison.

At Gerdau, we monitor the PPI which is issued monthly from the Bureau of Labor Statistics because our past analysis has led us to believe that the BLS PPI numbers measure-up to real-world pricing. We feel it is important for us and our customers to know where we are pricing-wise relative to history and how we stack-up against competing materials.