Nonresidential Construction Materials Prices Hold Steady in September

Overview

Prices for inputs used in nonresidential construction were unchanged in September after increasing 0.5% in August. There were no areas that jumped out as an explanation of the flattening. In general some energy and metals prices were down. Meanwhile, lumber, cement, and copper prices were up.

Prices of building materials primarily used in residential construction were 0.2% higher in September after rising 0.3% in August July. Higher prices for insulation, which have jumped significantly recently, and for gypsum, along with the aforementioned lumber, which is more heavily used in residential construction than in nonresidential construction, cement, and copper prices contributed to the increase. At the same time, prices for oriented strand board (OSB) continued their recent decline, offsetting some of the increases in other materials.

The outlook is for nonresidential building materials prices to rise modestly into early next year. Stronger than expected growth would translate into greater building materials price inflation. Lower than expected growth would mean a slower rise in building materials prices. Most of the risk is on the downside given the uncertainty created in Washington by the recent partial shutdown of government operations, resolved with a continuing resolution, and the last minute short-term lifting of the debt ceiling, leaving both issues hanging over the political and economic landscape into early 2014. This uncertainty has been a drag on investment, and consequently on construction.

Construction Materials Inflation

The Bureau of Labor Statistics (BLS) reported that the Producer Price Index (PPI) for materials and components used in construction rose 0.4% on a seasonally adjusted (SA) basis in September. That was up from a 0.2% increase in August. The index was up 2.0% on a not seasonally adjusted (NSA) year-over-year basis and was 8.5% higher than in September 2010.

Meanwhile, the more volatile prices for raw materials used in construction or to produce products used in construction shot up 1.6% after falling 0.2% in August. The index was up 3.3% from September 2012 and was up 7.8% from September 2010.

An index that measures inputs used in nonresidential construction (excluding capital equipment) was flat in September following an advance of 0.5% (NSA) in August. The index was up a modest 0.1% from September 2012 and was 11.0% higher than in September 2010.

An index that measures inputs used in residential construction (excluding capital equipment) rose somewhat faster, up 0.2% (NSA) in September following an increase of 0.3% in August. The index was 1.2% higher than in September 2012 and was 10.8% higher than in September 2010.

US Construction-Related Price Indexes
	Percent Change
	Monthly from Previous Month NSA data unless otherwise indicated			3-Month Moving Average from Previous Month NSA data unless otherwise indicated			Year-over-year NSA data			3 Years Ago NSA data
	Sep-13	Aug-13	Jul-13	Sep-13	Aug-13	Jul-13	Sep-13	Aug-13	Jul-13	Sep-13
Composite Indexes (Exclude capital equipment)
Construction Materials* (Unprocessed materials)	1.6	-0.2	0.4	0.6	0.0	0.5	3.3	1.4	1.8	7.8
Materials and Components for Construction* (Processed goods)	0.4	0.2	0.0	0.2	0.1	-0.1	2.0	2.0	1.9	8.5
Inputs to Construction (Residential and Nonresidential) (Includes inputs to maintenance and repair)	0.1	0.3	0.0	0.1	0.1	-0.1	0.6	1.4	2.0	10.9
Inputs to New Construction	0.1	0.3	0.0	0.1	0.1	-0.1	0.7	1.4	2.0	10.9
Inputs to Residential Construction	0.2	0.3	-0.1	0.1	0.0	-0.1	1.2	1.7	2.1	10.8
Inputs to Nonresidential Construction	0.0	0.5	-0.1	0.1	0.1	0.0	0.1	1.2	1.8	11.0
Inputs to Commercial Construction	0.1	0.3	0.0	0.1	0.1	0.0	0.7	1.3	1.8	9.6
Inputs to Industrial Construction	0.0	0.4	0.1	0.2	0.2	0.0	0.2	0.9	1.5	9.4
Inputs to Heavy Construction	0.1	0.4	0.0	0.2	0.1	0.0	-0.1	1.1	1.9	11.9
Inputs to Maintenance and Repair	0.0	0.4	-0.2	0.1	0.0	-0.1	0.2	1.2	1.6	10.2
Inputs to Nonresidential Maintenance         and Repair	-0.1	0.4	-0.2	0.0	0.0	-0.1	0.0	1.1	1.5	9.9
Inputs to Res Maintenance and Repair	0.1	0.3	0.0	0.1	0.1	0.0	0.8	1.6	2.3	11.9
(Indexes include installation and overhead)
New Warehouse Building Construction	-5.7	0.1	0.4	-1.7	0.2	0.4	-3.0	2.9	2.9	3.4
New School Building Construction	0.2	0.0	0.6	0.3	0.2	0.2	1.5	1.2	1.2	8.1
New Office Construction	0.0	-0.1	0.6	0.2	0.2	0.2	1.4	1.4	1.4	6.6
New Industrial Building Construction	0.2	0.1	0.4	0.2	0.2	0.2	2.6	2.2	2.2	7.1
New Health Care Building Construction	0.5	0.2	0.6	0.4	0.2	0.2	2.2	1.6	1.5	NA
Other Related Indexes
PPI Finished Goods*	-0.1	0.3	0.0	0.1	0.4	0.4	0.3	1.4	2.1	9.6
PPI Finished Goods less food and energy*	0.1	0.0	0.1	0.0	0.1	0.1	1.2	1.1	1.2	6.4
CPI Urban Consumer*	0.2	0.1	0.2	0.1	0.2	0.3	1.2	1.5	2.0	7.2
CPI Urban Consumer less food and energy*	0.1	0.1	0.2	0.1	0.1	0.2	1.7	1.8	1.7	5.8
Production Index: Construction Supplies*	0.6	0.3	0.5	0.5	0.5	0.2	5.6	5.4	5.0	12.6
Retail Sales: Building & Equipment Supplies*	0.1	-0.3	1.8	0.5	0.1	0.6	7.9	6.8	13.9	15.1
*Seasonally-adjusted data for percent changes for monthly and 3-month moving average data NSA = Not seasonally adjusted, NA = Not Available Source: Producer Price Index (PPI) - Bureau of Labor Statistics; Production Index - Federal Reserve Board; Retail Sales - Census Bureau

Construction machinery prices increased 0.2% (SA) in September after inching up 0.1% in August. Construction machinery rental rates rebounded strongly from August’s 0.6% (NSA) decline, up 1.5% in September. Excluding oil field equipment, rental rates were up 2.5% in September after sinking 1.1% in August. Meanwhile, oilfield and well drilling equipment rental and leasing rates remained unchanged for the eighth month in a row.

Many builders and developers have shifted from buying construction equipment to renting construction equipment. On a year-over-year NSA basis, rental rate increases exceeded purchase price increases—4.7% versus 2.8%. Over a longer period, the rental rate increases have lagged behind increases for purchase prices. Rental rates were up 9.2% from September 2010, while purchase prices were up 9.8%. However, rental rates excluding oil field equipment were up 14.4% over that three year period. For the remainder of 2013 and into 2014, rental rate increases are likely to largely trend higher than equipment purchase prices.

US Construction-Related Price Indexes
	Percent Change
	Monthly from Previous Month NSA data unless otherwise indicated			3-Month Moving Average from Previous Month NSA data unless otherwise indicated			Year-over-year NSA data			3 Years Ago NSA data
	Sep-13	Aug-13	Jul-13	Sep-13	Aug-13	Jul-13	Sep-13	Aug-13	Jul-13	Sep-13
Assembled Equipment
Hand and Edge tools	-0.2	-0.2	0.8	0.1	0.2	0.3	1.5	3.2	3.3	5.6
Power Hand Tools	0.0	0.0	1.9	0.6	0.6	0.6	2.7	2.8	3.0	4.8
Appliances*	0.0	0.0	0.0	0.0	0.0	0.0	-0.6	-0.4	-0.6	5.6
Furnaces	0.8	-0.4	0.5	0.3	-0.3	0.2	3.2	2.1	2.7	7.9
AC; Refrigeration; and Forced Air Heating Equip. Mfg.	0.6	0.4	0.3	0.4	0.1	0.1	3.4	2.7	3.0	9.0
Construction Machinery*	0.2	0.1	0.2	0.2	0.1	0.1	2.8	2.5	2.5	9.8
Construction Machinery Rental (incl. oilfield equip.)	1.5	-0.6	1.4	0.8	0.4	0.4	4.7	4.1	6.9	9.2
Construction equipment rental and leasing	2.5	-1.1	2.2	1.2	0.6	0.7	6.9	5.7	9.2	14.4
Oilfield and well drilling equipment rental       and leasing	0.0	0.0	0.0	0.0	0.0	0.0	1.8	1.8	5.3	6.1
Trucks over 14,000 Ibs. GVW	0.0	0.0	0.2	0.1	0.2	0.3	1.5	1.4	1.4	5.9
Metal Doors, Sash and Trim	-0.1	0.2	-0.2	-0.1	0.0	-0.1	-0.5	-0.3	-0.6	8.6
*Seasonally-adjusted data for percent changes for monthly and 3-month moving average data NSA = Not seasonally adjusted, NA = Not Available Source: Producer Price Index (PPI) - Bureau of Labor Statistics

Cement and Concrete
Cement prices rebounded 0.5% (NSA) in September after sinking 0.6% in August. Prices were 4.5% higher than in September 2012 and 4.7% higher than in September 2010.

Prestressed concrete products prices surged 2.2% in September after no change in August. On a year-over-year basis, prices increased 5.5%. They increased 3.0% from September 2010.

Precast concrete products prices rose a more modest 0.4% in September after decreasing 0.2% in August. Prices were up 2.2% from September 2012 and were up 6.7% from September 2010.

US Construction-Related Price Indexes
	Percent Change
	Monthly from Previous Month NSA data unless otherwise indicated			3-Month Moving Average from Previous Month NSA data unless otherwise indicated			Year-over-year NSA data			3 Years Ago NSA data
	Sep-13	Aug-13	Jul-13	Sep-13	Aug-13	Jul-13	Sep-13	Aug-13	Jul-13	Sep-13
Construction Commodities
Dimension Stone	0.5	0.0	-0.1	0.1	0.0	0.0	3.9	3.8	3.7	7.4
Cement	0.5	-0.6	0.0	-0.1	-0.1	0.2	4.5	4.1	5.1	4.7
Construction Sand, Gravel & Crushed Stone*	1.7	-0.3	0.4	0.6	0.0	0.5	3.5	1.4	1.8	7.4
Softwood Plywood	1.2	-0.7	-8.1	-2.7	-3.5	-3.6	-1.7	0.8	4.4	20.6
Hardwood Lumber	1.0	1.8	0.8	1.2	1.2	1.6	17.2	15.8	14.5	12.3
Softwood Lumber*	1.7	2.1	-0.5	1.1	-1.3	-4.8	9.8	8.4	9.9	26.1
Other Commodities
Industrial Natural Gas*	0.6	-4.0	-5.6	-3.1	-3.6	-1.1	3.7	3.1	9.1	-12.8
Plastic Resins & Materials	0.5	0.3	-0.2	0.2	0.1	-0.2	6.2	4.3	4.5	16.8
Insulation Materials	3.7	2.3	0.9	2.3	0.8	0.3	8.8	3.9	1.7	22.6
Iron & Steel Scrap	-1.9	-0.6	6.3	1.2	1.2	-0.6	-3.4	-3.1	6.8	-6.0
Iron Ore	-1.5	-3.3	-0.4	-1.7	-1.9	-0.4	-27.5	-29.5	-26.8	-18.6
Copper Ores	1.0	3.4	-4.5	-0.1	-0.2	-1.6	-11.3	-5.8	-8.8	-11.7
Copper Base Scrap*	0.1	4.1	-1.3	0.9	1.5	0.3	-3.2	1.2	-4.9	4.3
*Seasonally-adjusted data for percent changes for monthly and 3-month moving average data NSA = Not seasonally adjusted, NA = Not Available Source: Producer Price Index (PPI) - Bureau of Labor Statistics

Energy and Related Products

Industrial natural gas prices ended three months of sharp declines, rising 0.6% (SA) in September, which followed a drop of 4.0% in August and a drop of 5.6% in July. Prices were up 3.7% (NSA) from September 2012, but were down 12.8% from September 2010.

Petroleum refineries prices fell back a bit in September, down 0.6% (NSA), after jumping 2.7% in August. Prices were down 8.3% from September 2012, but were up 32.3% from September 2010.

Diesel fuel prices bounded up 2.9% (SA) in September after rising 0.4% in August. Nonetheless, prices were down 4.7% (NSA) from September 2012, but were up 43.3% from September 2010.

Plastic resins and materials prices rose 0.5% (NSA) in September after increasing 0.3% in August. Prices were 6.2% higher than in September 2012 and were 16.8% higher than in September 2010.

Asphalt prices declined 0.2% (NSA) in September following a 1.5% jump in August. However, prices were down 3.1% from September 2012, although they were up 25.6% from September 2010. Asphalt roofing prices inched down 0.1% in September after falling 0.8% in August. Prices were up 2.9% from September 2012 and were up 7.2% from September 2010.

Plastics pipe prices were down 0.6% (NSA) in September following a 0.8% increase in August. Prices were up 2.2% from September 2012 and were up 18.0% from September 2010. Plastics plumbing fixtures prices shrank 0.1% in September following a slightly larger decline of 0.2% in August. Prices were off 1.4% from September 2012, but were 4.2% higher than in September 2010.

US Construction-Related Price Indexes
	Percent Change
	Monthly from Previous Month NSA data unless otherwise indicated			3-Month Moving Average from Previous Month NSA data unless otherwise indicated			Year-over-year NSA data			3 Years Ago NSA data
	Sep-13	Aug-13	Jul-13	Sep-13	Aug-13	Jul-13	Sep-13	Aug-13	Jul-13	Sep-13
Manufactured Materials
Gypsum Products	0.2	-0.2	-1.6	-0.5	-0.7	-0.4	15.8	14.0	14.5	30.6
Petroleum refineries	-0.6	2.7	-0.7	0.4	0.7	-0.3	-8.3	-2.5	1.8	32.3
Diesel Fuel*	2.9	0.4	5.6	2.9	2.4	2.4	-4.7	-1.6	4.4	43.3
Asphalt	-0.2	1.5	1.8	1.0	0.9	2.2	-3.1	-5.5	-9.6	25.6
Asphalt paving mixture & block mfg.	0.2	0.8	0.6	0.6	0.4	0.3	1.6	0.6	-0.8	14.2
Asphalt shingle and coating materials mfg.	0.0	-0.7	1.0	0.1	0.3	0.8	1.7	3.4	2.8	9.8
Asphalt Roofing	-0.1	-0.8	2.0	0.3	0.6	1.2	2.9	5.4	4.7	7.2
Paint	-0.2	-0.1	0.0	-0.1	-0.3	-0.2	-0.9	-0.8	-0.7	16.4
Plastic Construction Products	0.2	-0.1	-0.9	-0.3	-0.2	-0.2	-0.1	-0.1	-0.1	8.8
Plastics Pipe	-0.6	0.8	-3.6	-1.1	-0.1	-0.7	2.2	3.7	1.5	18.0
Plumbing Fixtures	-0.1	-0.2	0.6	0.1	0.1	0.2	-1.4	-1.1	-0.3	4.2
Vitreous Plumbing Fixtures	NA	-2.4	2.1	0.3	-0.2	1.4	NA	0.8	2.8	NA
Ceramic Tile	-1.2	-1.2	4.1	0.5	-0.2	0.6	4.9	4.9	6.3	1.7
Flat Glass	0.3	-0.3	0.1	0.1	0.1	0.7	3.0	3.0	4.5	6.8
Steel Mill Products	0.3	0.1	0.4	0.2	0.1	-0.4	-4.4	-3.4	-6.1	1.7
Steel Pipe and Tube*	0.9	2.2	2.2	1.7	1.5	0.3	-6.1	-6.8	-10.7	2.1
Hot rolled bars, plates & structural shapes	0.4	0.5	-0.7	0.1	0.1	-0.9	-4.2	-2.9	-7.1	2.9
Extruded Aluminum rod, bar and other shapes	0.7	-1.6	0.3	-0.2	-0.5	-0.5	-2.3	-3.6	-2.2	-2.7
Architectural Metalwork	-0.2	-0.2	0.0	-0.1	0.0	0.1	0.4	0.2	1.2	7.1
Metal Plumbing Fixtures*	-0.2	-0.6	2.1	0.4	0.2	0.5	1.7	2.4	3.1	6.2
Builders’ Hardware	-0.1	0.4	0.0	0.1	0.1	0.0	0.5	0.6	0.2	7.0
Sheet Metal Products	0.5	0.1	-0.1	0.2	-0.1	-0.1	-1.5	-2.0	-2.3	1.7
Copper and Copper Products	0.4	3.2	-3.1	0.1	-0.1	-1.7	-6.6	-2.5	-6.5	-4.0
Copper and Brass Mill Shapes	-0.1	4.4	-2.2	0.6	0.4	-1.7	-4.8	-1.3	-6.2	-2.3
Nonferrous Pipe and Tube	-1.5	4.2	-1.6	0.3	1.6	-1.5	-5.4	2.0	-3.0	-8.4
Building Brick	0.3	0.2	0.4	0.3	0.3	0.0	0.4	-0.1	-0.2	-5.4
Ready Mix Concrete*	-0.2	0.3	0.4	0.2	0.3	0.2	3.2	3.6	3.5	5.7
Concrete Block & Brick	0.0	-0.1	0.7	0.2	0.0	0.1	2.4	2.3	2.5	4.1
Prestressed Concrete	2.2	0.0	-0.1	0.7	0.0	0.3	5.5	2.5	1.7	3.0
Precast Concrete Products	0.4	-0.2	0.7	0.3	0.1	0.2	2.2	1.7	2.7	6.7
Concrete Pipe	-0.1	0.1	0.7	0.2	0.4	0.3	4.3	4.5	4.4	7.8
Engineered Wood Products	1.4	0.2	-0.6	0.3	-0.2	-0.3	10.9	12.3	13.0	22.1
Wood Kitchen Cabinet and Countertop Mfg.	0.1	0.0	-0.1	0.0	-0.1	0.0	2.8	2.7	2.8	6.8
Millwork (window, door, cabinet)*	0.2	0.3	-0.1	0.1	0.1	0.0	2.6	2.5	2.5	6.9
Wood Window and Door Mfg.	-0.1	0.2	0.1	0.1	0.1	0.1	1.9	1.6	1.6	8.5
Metal Window and Door Mfg.	0.0	0.1	-0.3	-0.1	0.0	-0.1	-0.6	-0.6	-0.8	8.2
Laminated Plastics	0.5	0.2	-0.2	0.2	-0.1	0.0	3.8	3.3	3.8	8.5
Nonresidential Electric Lighting Fixture Mfg.	-0.1	0.0	0.0	0.0	0.0	0.0	-0.1	0.2	0.4	5.3
*Seasonally-adjusted data for percent changes for monthly and 3-month moving average data NSA = Not seasonally adjusted, NA = Not Available Source: Producer Price Index (PPI) - Bureau of Labor Statistic

Copper and Copper Products

Copper ores prices advanced strongly for the second month in a row, up 1.0% (NSA) in September after surging 3.4% in August. Despite the recent increases, prices were 11.3% lower than in September 2012 and were 11.7% lower than in September 2010.

Copper base scrap prices rose 0.1% (SA) in September after soaring 4.1% in August. Prices were down 3.2% (NSA) from September 2012 but were up 4.3% from September 2010.

Prices for copper and copper products increased 0.4% (NSA) in September after jumping 3.2% in August. Prices were 6.6% lower than in September 2012 and were 4.0% lower than in September 2010.

Copper and brass mill shapes prices edged down 0.1% in September after climbing 4.4% in August. Prices were down 4.8% from September 2012 and were down 2.3% from September 2010.

Other Metals

Steel mill products prices advanced 0.3% (NSA) in September after rising 0.1% in August. Prices were 4.4% lower than in September 2012, but were 1.7% higher than in September 2010. Hot rolled bars, plates, and structural shapes prices increased 0.4% in September after increasing 0.5% in August. Prices were 4.2% lower than in September 2012, but were 2.9% higher than in September 2010.

Iron and steel scrap prices are often a good predictor of steel prices in the short term. They dropped 1.9% in September after falling 0.6% in August. Prices were 3.4% lower than in September 2012 and were 6.0% lower than in September 2010.

Over the six months from April through September, iron and steel scrap prices declined with the notable exception of a 6.3% jump in July. Also, the 3-month average for scrap prices was down 0.6% in September. Given the recent two monthly declines and September’s decrease in the 3-month average, look for steel prices to flatten soon and possibly drop a bit.

The current slowdown in nonresidential construction and multifamily construction activity in the United States is exerting downward pressure on prices. However, economic activity is picking up in many parts of the world and, in spite of the political bickering in Washington, the U.S. economy is likely to improve over the course of 2014 and into 2015. That would mean higher steel prices down the road.

Extruded aluminum rod, bar, and other shapes prices increased 0.7% (NSA) in September after falling 1.6% in August. Prices were down 2.3% from September 2012 and down 2.7% from September 2010.

Softwood Lumber and Gypsum

Single-family housing construction activity largely drives demand for softwood lumber and gypsum products. As the single-family housing market has improved, demand for these materials has improved as well.

Initially, softwood lumber, plywood, and oriented strand board (OSB) prices increased rapidly, mainly due to supply limitations. As supply expanded, these prices reversed. As of September OSB prices were down 23.0% from a year ago.

Softwood lumber price movements are complicated by fluctuations in Canadian softwood lumber exports to the U.S., which are regulated by the Softwood Lumber Agreement (SLA). The level of exports permitted and any relevant export fees are determined monthly by a schedule based on the average weekly Random Lengths (RL) composite price for softwood lumber over a specified four week period prior to each month. The schedule determining the permitted level of exports consists of four categories (or tiers). From most restrictive to least restrictive and the related prices per thousand board feet determining which category is in force for the month, the four categories are as follows:

    Category 1: average price of $315 or lower

    Category 2: average price of $316 to $335

    Category 3: average price of $336 to $355

    Category 4: average price of $356 or higher; eliminates all restrictions and export fees on Canadian softwood lumber exports to the United States

Increased single-family construction activity and repair activity following Hurricane Sandy, together with supply bottlenecks, drove prices for softwood lumber to a level that resulted in tier 4—no restrictions on Canadian exports—for the first seven months of 2013. The average price to determine restrictions on Canadian exports to the U.S. for August was $326, resulting in tier 2. The average price for September and October was the same—$353, resulting in tier 3. For November, the average price was $380, resulting in tier 4—no restrictions. Reed Economics estimates that the average price for December will be $387—again tier 4 and no restrictions.

The weekly average RL framing lumber composite price has generally been rising since hitting a local low of $322 the week ending July 21. The PPI for softwood lumber rose 1.7% (SA) in September after increasing 2.1% in August. Prices were up 9.8% from September 2012 and were up 26.1% from September 2010.

The table below summarizes recent average prices and the resulting tier (category).

Average Prices Used to Determine SLA Canadian Softwood Export Restrictions
	2012
	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
Average Price	$264	$269	$283	$289	$299	$321	$343	$323	$328	$341	$326	$334
Tier	1	1	1	1	1	2	3	2	2	3	2	2
	2013
	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec*
Average Price	$357	$385	$395	$416	$443	$407	$356	$326	$353	$353	$380	$387
Tier	4	4	4	4	4	4	4	2	3	3	4	4
Source: Foreign Affairs and International Trade Canada *Reed Construction Data estimate

Last year several gypsum producers announced price increases of 25% to 30% effective at the beginning of this year. Up until this summer gypsum producers had partial success implementing their higher prices. However, for the three months from June through August, gypsum prices fell. In September prices started inching up again, rising 0.2% (NSA) after slipping 0.2% in August. From December through September, gypsum prices increased 16.3%. They were up 15.8% from September 2012 and were up 30.6% from September 2010.

Starting in the spring, several gypsum producers have now announced price increases around 20% effective January 1, 2014. If single-family construction picks up next spring, as we fully expect, gypsum prices are likely to eventually increase by about 10% to 15%.

Outlook for Construction Materials Prices

Although the partial shutdown of the federal government has ended, the issues that prompted the shutdown have not been resolved. The shutdown was the result of a failure to enact a budget for this fiscal year (beginning October 1). A temporary resolution was achieved with a continuing resolution (CR), extending last year’s budget through January 15 and leaving in place the sequester (the across the board reduction in spending for much of the government).

Unless a budget for this fiscal year or another CR is passed by January 15, there will be another partial government shutdown. Another issue that has been caught up in this political wrangling is the need to raise the federal debt ceiling. The CR included raising the debt ceiling to a level that allows the Treasury to continue borrowing until early February.

Failure to raise the debt ceiling would be an even bigger threat to the U.S. economy than a partial government shutdown. The impact of hitting the debt ceiling would mean the delay of numerous payments, including payments for Social Security and Medicare, federal payrolls, contractors, tax refunds, and debt payments (a technical default of U.S. government debt).

The political infighting in Washington has created additional uncertainty with the result that businesses are delaying hiring and investment. This is a drag on construction spending, exerting downward pressure on building materials prices.

Assuming that the budget/debt ceiling battles are resolved by mid-January, the Reed forecast is for nonresidential construction activity to slowly recover and to advance at a moderate pace in the first half of 2014 and to strengthen in the second half of 2014 and throughout 2015. This will create moderate upward pressure on construction materials prices early next year and accelerate in the latter part of 2014 and into 2015.

Source: Read Construction Data