The PPI for all commodities moved up 4.9% year on year (y/y), its fourth month in a row of increases after a 24 month stretch of month on month declines. The material and construction components PPI also moved higher, up 2.0% y/y, its eighth consecutive y/y increase.

ppi-fig1Figure 1 shows the PPI for all commodities. After two full years of declining prices in 2015 and 2016, the index has reversed direction in 2017 and is trending higher. This indicates rising demand for construction materials, good news for the industry.

Figure 2 examines the materials and components PPI for non-residential buildings. The index fell ppi-fig2sharply starting December 2014 and continued to post double-digit y/y declines from February to November of 2015. The declines moderated in 2016, gradually declining before turning positive in November. Since then, the index has not only been increasing but the percentage change has been accelerating with each passing month. This suggests that demand for non-construction is continuing to strengthen.

ppi-table1Table 1 presents construction steels and competing materials. The data lists the PPI in percentage change terms referencing timeframes 3, 6, 12 and 24 months ago. This tells us whether or not pricing is moving up or down and gives a relative comparison with competing materials. All construction materials are moving higher when viewed on a 3 and 6 months ago basis. On a y/y comparison all construction materials increased in price except for fabricated steel for bridge applications and asphalt and tar paving mixtures. Pipe and hollow structural tubing increased the most, up 17.2% y/y, followed by softwood lumber, + 12.4% and prestressed concrete bridge beams, +12.0%. Hot rolled structural shapes also moved up smartly, +9.2% on a 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.