The U.S. producer prices index (PPI), for all commodities was up 0.4% in September. On a 12 months year on year, (y/y) comparison, the all commodities PPI rose 3.6%. The all commodities index has moved higher in each of the last ten months on a y/y basis.

Figure 1 shows the 3MMA, PPI for all commodities from 2000 to present. The index began declining mid-2014, bottoming-out in March 2016. Since then the trend has been higher with most econometric indicators pointing to continued higher pricing going forward.

Figure 2 shows the 3MMA, materials and components PPI for construction from 2000 to present. The material and construction components PPI increased by 0.2% m/m and by 0.5%, 3 months y/y. On a 12 months y/y metric, the material and construction component PPI gained 2.4%. On a 3MMA, the index has increased in each of the past 18 months.

Figure 3 shows the 3MMA, material and components for non-residential construction PPI from 2000 to present. The non-residential construction PPI rose 06% m/m, 1.0%, 3 months y/y. On a 12 months y/y metric, the PPI gained 3.1%. This index has increased in each of the last 11 months on a 12 month y/y comparison. Looking at the PPI sub-indexes within non-residential construction: Warehouse construction rose 4.1% y/y, Office was up 2.8%, Industrial structures costs increased by 4.4% and “other” non-residential construction increased by 3.1% y/y.

The overall number for all materials and components of construction was up 0.5% over the past three months and up 2.4% y/y. Structural steel shapes prices are moving-up, advancing 0.8% over 3 months and by 7.9% y/y. The PPI for pipe, tube and hollow structural shapes fell 1.5% over 3 months, but was up 3.9% y/y. Fabricated structural steel for non-residential construction moved up 2.0% over three months and by 4.6% y/y.  Fabricated structural steel for bridges increased by 0.1% over three months and by 3.7% y/y.  Fabricated bar joist and fabricated rebar, (grouped together in one category) also increased in price, up 1.5% over 3 months and up 5.1% on a y/y comparison.

Competing materials are also getting more expensive. Ready-mix concrete was up 0.3% over 3 months and higher by 3.3% over a one year period. Prestressed concrete bridge beams increased in price as well, climbing 0.1% over 3 months and up by 6.3% over 12 months. Softwood lumber was up 0.6% over 3 months and surged higher by 9.9% over the year. Wood trusses also moved sharply higher increasing 1.6% over 3 months and by 8.9% y/y.

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.