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Building material prices rising at different rates

Building material prices rising at different rates

Posted on: 8/2/2018 | Author: ATB Financial's Economics + Research Team

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It’s been said that, in Alberta, there are really only two seasons: winter and construction. The summer of 2018 is no different, with thousands of construction projects ongoing around the province. As these projects proceed, construction companies and builders understand that containing cost is essential to maintaining their bottom line.

The Producer Price Index—similar to the Consumer Price Index — tracks the price movements of various inputs purchased by producers. The graph below shows three major inputs in the construction sector: diesel fuel for heavy equipment, softwood lumber, and ready-mix concrete. Each has risen in price over the last 20 years, but the path of their price movements has varied greatly.

The red line shows price movements of diesel fuel. Setting prices in 1998 equal to 100, the price index in June of this year was 396.4, a near four-fold increase. Like regular gasoline prices, diesel prices have been extremely volatile over the last two decades.

In sharp contrast is the price of ready-mix concrete, illustrated by the yellow line. Prices have tended to increase either gradually or not at all. Compared to June 1998, prices are higher by 78 per cent. That’s still greater than the comparable Consumer Price Index, which is up 57 per cent.

The price for softwood lumber is shown by the blue line. It’s spent most of the last twenty years below the 1998 price. Only in the last year have prices returned above where they were two decades ago. In June, the price index was about one third higher, coming in at 132.6.

Producer prices, graph​​

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