There is a ‘shorthand’ way of determining whether or not construction material costs are becoming markedly more expensive.
That methodology is to graph and study price movements in the “Big 5” commodities: lumber, cement, steel, copper and gasoline. Those building products (or raw material inputs) play outsized roles in construction projects.
The first three have special significance as framing materials. As for the other two, copper (plumbing and wiring) and gasoline (transportation), their usage is so widespread on and leading to construction sites, that they demand to be included. (Diesel fuel could be chosen over petrol, but the latter plays a bigger role in the economy at large, plus it serves as a good proxy for the former anyway.)
Graph 1 shows the relative performances of the five highlighted commodities since the end of the Great Recession in July 2009. In other words, Graph 1 concentrates only on the economy’s recovery and expansion phases since the Big Dip.
For ease of comparison, all five series have been given the same starting point and starting value.
For each series, its value in July 2009 has been set equal to 100.0. Subsequent months are then expressed relative to July 2009. (For example, if an actual price moves from say $60 per unit to $66 in 12 months, i.e., an increase of +10.0%, then its index value will increase from 100.0 to 110.0, also +10.0%, over the same period.)
The background data comes from the Producer Price Index (PPI) series calculated and published by the U.S. Bureau of Labor Statistics (BLS). (As a side note, most internationally traded commodities are priced in U.S. dollars. The implication for Canadians is that some construction material costs may be adversely affected by the low-valued ‘loonie’.)
