Margin stress may mean higher prices
Plant engineers who are buying construction and maintenance supplies in the months ahead had better beware of some potentially grouchy suppliers. That’s because of the 19 construction supply industries that we track, 10 are saddled with a margin “grade” of D or F. Failing margin grades mean these industries are experiencing inflation-related distress to their margins.
Consider, for example, the general sawmills (SIC 2421) industry. Between November 1999 and November 2000, average product prices in sawmills fell 4.1%. Meanwhile, direct manufacturing costs in sawmills fell only 0.3%. Buyers of sawmill products will have a tough time mounting a cost-based argument for avoiding price hikes.
Unfortunately, the news ahead for buyers of environmental controls isn’t looking too good either. Since the start of this year, producers of automatic building, refrigeration, and appliance controls (SIC 3822) have held prices in check while their per-unit manufacturing costs have increased 2.8%.
|General sawmills and planing mills||2421||-0.14||-4.12||Stable||D||2.79||1.80|
|Hardwood veneer and plywood||2435||1.75||1.72||Falling||A+||3.83||3.26|
|Softwood veneer and plywood||2436||-12.20||-15.00||Falling||F||3.83||3.26|
|Metal partitions and fixtures||2542||0.57||0.46||Falling||C||6.17||5.22|
|Paints and allied products||2851||1.82||2.23||Falling||D||5.69||4.30|
|Other structural clay products||3259||2.92||3.70||Stable||A||6.20||5.43|
|Steel pipe and tubes||3317||2.14||4.21||Falling||A||6.79||6.75|
|Plumbing fittings and brass goods||3432||2.63||2.74||Falling||B||5.49||4.70|
|Metal doors, sash, and trim||3442||1.45||1.77||Falling||C||5.17||4.39|
|Sheet metal work||3444||0.69||1.11||Falling||C||23.38||25.30|
|Refrigeration and heating equipment||3585||-0.42||-0.29||Stable||F||5.30||2.74|
|Current-carrying wiring devices||3643||-0.17||-0.61||Stable||F||21.55||21.94|
|Noncurrent-carrying wiring devices||3644||0.46||0.89||Stable||C||21.55||21.94|
|Commercial lighting fixtures||3646||-0.32||0.11||Stable||D||7.13||6.35|
1Average product price changes are calculated from the producer price index for each 4-digit SIC (standard industrial classification) industry from the U.S. Bureau of Labor Statistics.
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.
3Growth 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 (telephone: 360-452-6159; e-mail: email@example.com).