Home » Behind the Headlines » Construction PPI Excludes Imports and Tariffs

Construction PPI Excludes Imports and Tariffs

When assessing or tracking the pricing affect of tariffs on construction materials, you need to understand that the Producer Price Index (PPI) does not include imports (imports are not produced in the US) or tariffs. See items 4 and 24 in the FAQ provided by the Bureau of Labor Statistics. Construction PPI changes reflect pricing decisions domestic producers make on domestic products in reaction to tariffs on imported products. Tariffs have big impact on domestic prices.

BLS explanation of method and definitions

The price change we see in the PPI for construction materials reflects the domestic material prices of ALL other domestically produced materials used in the industry. While tariffs may affect only 10% of products used in the industry the PPI shows us the domestic producers reaction applied to the other 90%.

For example: Steel tariffs of +25% applied only on imported steel, affected only 30% (the imported share) of steel used in US. However the PPI shows us that all other domestically produced steel in the US and used in construction increased in price between 12% and 22% in 2018. Prices of domestic steel have receded somewhat, now ranging from +7% to +13%. But the point is that tariffs caused a price increase also in domestic steel.

AGC Tables of Construction PPI

The cost of ALL DOMESTIC steel mill products (of all types) produced in the US increased 18% in 2018 after the steel tariffs were imposed. That is domestic producers pricing response in reaction to tariffs. Tariffs impacted pricing decisions on all domestically produced products, not just the imported products. The increase has since receded but is still up 10%. Consumers pay the price.


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