Producer Price Index Rises in August

The government’s Producer Price Index (PPI) for August was walloped by a near-record +34.6% increase in the diesel price index. According to an analysis of the PPI data by the Associated General Contractors (AGC), the price of materials and services used in nonresidential construction increased +1.1% from July to August. Association officials noted that most other commodity prices were subdued but said their newly released survey showed contractors continue to experience widespread problems finding qualified workers and will be challenged by the costs associated with those shortages.

“The steep climb in diesel prices since July is a reminder that construction cost worries have not gone away,” said Ken Simonson, the association’s chief economist, in the press release. “An even great challenge for most contractors is finding enough qualified workers to complete the many projects available to work on.”

The producer price index for diesel fuel, which covers the selling price at the terminal rack or refinery, saw the largest one-month jump since 1990. Simonson noted that retail diesel prices have continued rising since then and have climbed 77 cents per gallon in the past 10 weeks.

The +1.1% monthly increase in construction input costs was the largest since January, Simonson pointed out. In contrast, the index for new nonresidential building construction — a measure of the bid prices contractors said they would charge to erect a set of new structures — edged up just +0.2% in August.

Prices for most major construction inputs other than fuel were stable or declined in August. Indexes for cement and architectural coatings such as paint were flat. There were decreases of -0.2% in the index for plastic construction products, -0.5% steel mill products, and -0.4% for gypsum building materials. EM’s Electrical Price Index utilized the PPI data for more than 20 key electrical product groups, and an analysis of the EPI for August is available in the website's Electrical Price Index section.