The producer price index for finished goods rose 1.6 percent in June, not seasonally adjusted (1.8 percent if seasonally adjusted), and 9.2 percent during the past 12 months, the Bureau of Labor Statistics recently reported. The PPI for inputs to construction industries, which measures changes in prices of all types of construction materials, plus diesel fuel and other items consumed during construction, rose 1.8 percent in the month and 10 percent during the past 12 months.

The largest increases were for inputs to highways and streets (2.9 percent and 19 percent) reports Ken Simonson, chief economist of Associated General Contractors of America, followed by heavy construction (2.9 and 19 percent), nonresidential buildings (1.7 percent, 10 percent), multi-unit residential (1.5 percent, 7.7 percent) and single-unit residential (1.3, 5.9 percent). Highway costs climbed because of large increases in the PPIs for commodities such as diesel fuel (5.7 percent, 85 percent), steel mill products (8.1 percent, 30 percent) and asphalt paving mixtures and blocks (6.7, 17).

Asphalt prices are growing, and some states report shortages of either asphalt or the petroleum-derived polymers added to improve its performance. Steel prices continue upward, largely because of strong foreign demand for both finished construction steel and iron and steel scrap used to produce it. Rebar manufacturers will raise prices another $60 per ton August 1, Simonson reports.

New construction starts dropped 1 percent in June, seasonally adjusted, according to McGraw Hill Construction. The year-to-date decrease for the first six months of 2008 is 16 percent compared to the same period last year.