Falling energy prices dragged down overall wholesale prices 1.3% in September, the largest decline in 2006, according to the Bureau of Labor Statistics. But core inflation, which excludes food and energy commodities, shot up 0.6%--the largest run-up of the year.
The Associated General Contractors of America (AGC), which represents the construction industry, cautioned that its members remain vulnerable to rising prices. AGC noted that inflation for construction materials and components rose 0.3% in September.
Generally, trucking companies that haul materials related to residential construction expect a downturn in volumes when new housing starts drop sharply, as they have from 2005 highs.
“Materials must be physically delivered, making them subject to high freight and fuel costs, as well as transportation bottlenecks,” said AGC chief economist Ken Simonson. “At the moment, falling diesel prices are helping contractors. But I expect construction material costs over the next year to rise at least 6 to 8% versus 2 to4% for the overall economy.”
A separate report released by the U.S. Census Bureau shows retail and food service sales in September dropped 0.4%, led by a 9.3% drop in sales at gasoline stations. Automotive-related sales, which account for approximately three-quarters of total retail sales, remained flat that month. Retail sales excluding autos fell 0.5%. Clothing and clothing accessory stores saw the biggest boost in sales that month, up 3%.
Meanwhile, growth in the manufacturing sector slowed in September, according to the Institute for Supply Management (ISM). The slowdown was blamed in part on a weakening housing market, ISM said.[email protected]