The construction industry is finally seeing some relief in building materials inflation, according to Bernard M. Markstein, U.S. chief economist for Reed Construction Data. Recent declines in energy prices are leading to lower prices for some materials and slower increases for others. Less than stellar increases in both residential and nonresidential construction activity are also keeping the lid on prices. Among major categories seeing price declines in April besides energy products were iron and steel scrap, gypsum products, extruded aluminum rod, and copper and copper products.

This does not mean that prices are necessarily down from a year ago, writes Markstein. However, overall building materials inflation for the past year has been roughly in line with general U.S. inflation. For the next several months, building materials prices are likely to continue to move in line with overall inflation. Better than expected construction activity would put additional upward pressure on building materials prices, a tradeoff most in the industry would readily accept.

The Bureau of Labor Statistics (BLS) reported that the seasonally adjusted (SA) Producer Price Index (PPI) for materials and components used in construction rose 0.3% in April after increasing 0.2% in March. The index was up 2.9% on a year-over-year basis, and 7.4% since April 2009. Meanwhile, prices for raw materials used in construction or to produce products used in construction rose faster, up 0.9%, after increasing 0.4% in March. The index was up 3.8% from a year earlier and 5.9% from three years earlier.

The full report can be found on the Reed Construction Data website.