Real gross domestic product expanded by just 0.7% (seasonally adjusted annual rate) during the fourth quarter of 2015. This follows a 2% increase during the year’s third quarter and a 3.9% increase during the second quarter. For the year, GDP expanded by just 2.4%, matching the slow rate of growth seen in 2014. Without any support from real GDP growth, our Construction MMI keeps falling.
With no GDP growth it shouldn’t come as a surprise that prices of construction materials are still falling. Low prices are always the solution to low prices… except when they’re not.
In the fourth quarter, overall inflation came in at just 0.8% with sharp declines in both import and export prices. The Federal Reserve’s benchmark Personal Consumption Expenditures Price Index (commonly known as the PCE deflator) came in at just 0.1% with both durable and non-durable goods’ prices registering a decline.
“The economy did not end the year well,” said Associated Builders and Contractors Chief Economist Anirban Basu. “Today’s GDP data adds weight to the argument that the US is in a corporate profits recession, an industrial recession, and was experiencing a softening of investments. With the exception of the residential building sector, business capital outlays have declined as corporations deal with a combination of sagging exports, competitive imports, declining energy-related investments, rising wage pressures and healthcare costs.”
All Construction-Sector Metals, Materials Down?
With the exception of scrap, no single product tracked in our Construction MMI showed much of an increase this month, a worrisome trend that’s carried on since the beginning of last year, except for a small increase in June.
New tariffs by the European Union on Chinese rebar might help producers there recover some market share, but won’t likely move prices on international exchanges. Globally, the deflationary environment is worse than it is for US producers.
Steel and aluminum markets are still not seeing anything close to a bottom and that’s being felt acutely in construction.
Actual Construction Materials Prices
US shredded scrap increased to $188.00 per short ton from $173/st in January, a rise of 8.7%. Commercial 1050 aluminum sheet from Europe fell to $2,330.63 per metric ton from $2,333.20 per mt in January, a fall of only 0.1%.