The Cost Curve: Price Trends for Glass and Construction Materials

January 7th, 2016 by Editor

In the post-recession construction recovery, each major building material has been uniquely affected. Materials primary to the glazing industry have fared differently than others.

In a recent construction forecast webinar hosted by CMD Group, Associated General Contractors of America chief economist Ken Simonson compared the flat glass producer price index (PPI) to other key inputs.

From the beginning of 2010 through three quarters of 2015, most of the eight inputs  followed distinct up-and-down patterns. Some prices finished the five years much higher (gypsum), while others decreased substantially (copper and brass mill shapes).

Flat glass, meanwhile, has been steady.

According to the index, flat glass prices remained level until mid-2012. That’s, when they began the slight uptick they’ve been on since. Most notable, however, is the sharper increase the flat glass PPI saw in 2015.

“Prices used to be as flat as the name suggests,” Simonson said before pointing to the big jump in prices in the middle of last year.

The PPI reported a spike of nearly 3 percent in flat glass prices in June, and prices rose almost 2 percent more the next two months.

According to the index, the increases slowed at the end of the year, but flat glass prices were up 6.1 percent from November 2014 to November 2015.

Aluminum mill shapes and steel mill products, meanwhile, dropped throughout the year. From September 2014 to September 2015, both inputs saw 12-percent decreases in price.

Diesel fuel prices, which affect transportation for most industries, saw a drastic 44-percent decrease in that span.

PPI for construction materials, according to Simonson, were forecasted to dip 3 percent through 2015. That follows a near 1-percent decrease in 2014. He projects PPI of materials to increase up to 2 percent annually over the next two years, as total construction spending continues to increase.

While materials prices finished the year substantially lower in 2015 than 2014, the biggest challenge remains labor cost and labor availability, Simonson said.

The employment cost index was 1.8 percent in 2014. Simonson projects the 2015 index is between 2-2.5 percent and employment costs will increase another 3-4.5 percent annually over the next two years.


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