Inflation Trends and Building Material Prices

Inflation Trends and Building Material Prices

For the past five months (September 2009 through January 2010), the Consumer Price Index (CPI) has risen 0.2% per month. Building materials prices are an exception to general inflation trends, which appear to be tame.

On a year-over-year basis, the Consumer Price Index (CPI) is up 2.6%. Excluding food and energy, the index is up 1.6% from a year ago. A broader measure of inflation used by the Federal Reserve — the price index for personal consumption expenditures excluding food and energy — rose 1.6% in the fourth quarter at a seasonally adjusted annual rate and 1.5% from fourth quarter 2008.

However, an index produced by the Bureau of Labor Statistics that tracks building material prices for builders of single-family homes and multifamily structures has now risen three months in a row.

Although on a year-over-year basis, the single-family index is up only 0.3% and the multifamily index is up a slight 0.2%, in January, both measures jumped 1.0% from December. Chief contributors to the recent rise are lumber, fuel products (gasoline and diesel), plumbing fixtures and copper products.

With a number of countries around the world on the expansion path, building material prices are likely to continue to rise in coming months.

The recent earthquake in Chile will disrupt supplies of some imported building materials — in particular, moldings and door frames. These items can be, and likely will be, replaced by items from other countries, but at a higher price. But Chile is also a major exporter of copper, and although the mines escaped direct damage, operations and shipping will likely be delayed as the country recovers. So far, copper prices on the COMEX are up about 4% since the quake.

Are you waiting for the price of that new home you’d like to build to drop further?  I wouldn’t.

Chuck Miller _{GMB   CGB  CGP   MIRM   CMP   MCSP   CSP}

President / Builder – Chuck Miller Construction Inc.

(208) 229-2553

[email protected]