Inflation in softwood slows (a bit), but others pick up the slack
Like a summer heat wave that just won't break, inflation in construction and maintenance supplies shows little sign of abating. Today price inflation is accelerating in 16 of 21 industries from the PLANT ENGINEERING construction and maintenance supplies index. Three months ago that number was 17 because softwood plywood was still speeding out of control.
Like a summer heat wave that just won’t break, inflation in construction and maintenance supplies shows little sign of abating. Today price inflation is accelerating in 16 of 21 industries from the PLANT ENGINEERING construction and maintenance supplies index. Three months ago that number was 17 because softwood plywood was still speeding out of control. The latest report shows softwood plywood tags accelerated “only” 43.5% in the 12-month period ending May 2005, slowing from the 48.7% inflation rate recorded three months earlier.
Excluding pesky softwood, the most troublesome price hikes came from three industries. Producers of steel pipes & tubes raised their average product prices 33.2% in the 12 months ending May 2005, up from 17.4% three months earlier. Over the same time period, makers of noncurrent-carrying wiring devices pushed tags up 21.6% after an 11.3% hike three months prior. Finally, sawmill operators raised their average prices 15.3% on the heels of a 10.9% price hike.
The good news for factory maintenance budgets: all four of the top inflationary industries are experiencing stable or falling underlying cost trends. That’s why these industries are sporting a B grade in our margins column. So room for negotiation is starting to emerge.
In fact, if you argue that manufacturing margins should return to average levels held over the past five years, then softwood plywood tags have room to fall 11.3%. Likewise, prices for steel pipe and tubes can drop 8.2%, noncurrent-carrying wiring devices can fall 6.1%, and sawmill products can dip 2.7%. Beware, however, for if suppliers in these four industries want margins to return to year-ago levels, then they can make a case for respective price hikes of 35.1%, 2.6%, 10.8%, and 4.7%.
|Construction & maintenance supplies||Average Product Prices (1) % Change During 12 Months Ending||Direct Manufacturing Costs (2) and Margins Grade||Growth in U.S. End Markets (3) % Change During 12 Months Ending|
|Industry||3 months ago||Current month||Costs are||Grade||3 months ago||Current month|
|(1) Average product price changes are calculated from the producer price index for each 6-digit NAICS (North American Industry Classification System) industry from the U.S. Bureau of Labor Statistics.
(2) Analyses of each industry’s direct manufacturing cost changes are from Thinking Cap Solutions Inc.’s proprietary Industry Cost Escalation (ICE) model. The “grade” indicates that recent price/cost changes have produced record high (A+) margins to average margins (C) to record low (F-) margins for the average producer in an industry. Grades of A to A+ mean plant engineers may be able to strike a better bargain with suppliers and better control plant costs.
(3) Growth in U.S. end markets data are from the ICE model and are estimates of output for the domestic end markets which purchase a given industry’s products.
All data prepared and presented by Thinking Cap Solutions Inc., Port Angeles, WA (email: email@example.com)
|Wood windows & doors||1.36||2.21||falling||D||3.50||3.94|
|Other millwork (excl. windows & doors)||7.73||10.92||falling||C||3.95||4.45|
|Shelving & fixtures||3.77||7.18||falling||A||2.79||2.98|
|Sewer pipe & other structural clay products||1.89||1.53||stable||C||1.68||3.44|
|Fiberglass & other mineral wool||1.22||4.54||stable||A||5.68||5.59|
|Iron & steel pipes & tubes||17.38||33.22||stable||B||6.94||5.75|
|Metal & plastic plumbing fixture fittings||1.13||1.70||stable||F||4.97||4.97|
|Metal windows & doors||1.55||2.38||stable||F||3.57||4.11|
|Sheet metal work||3.67||6.95||falling||F||7.72||7.68|
|Current-carrying wiring devices||0.02||0.89||stable||F||6.89||6.39|
|Noncurrent-carrying wiring devices||11.31||21.62||stable||B||6.89||6.39|
|Nonresidential electric lighting fixtures||0.45||0.09||stable||D||2.32||3.17|