Politics

Price growth of construction materials surges to 14-year high

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A worker cuts metal in a construction area in Binondo, Manila on March 24, 2022. — PHILIPPINE STAR/RUSSELL PALMA

THE GROWTH in wholesale and retail prices of building materials accelerated to the highest level in 14 years in 2022, as construction activity picked up, according to preliminary data from the Philippine Statistics Authority (PSA).

Data from the PSA showed the construction materials wholesale price index (CMWPI) in the National Capital Region (NCR) averaged 8.3% in 2022, faster than the 3.2% seen in 2021. This was the highest pace in 14 years or since the 10.7% growth in 2008.

This despite wholesale price growth easing to 10.3% in December, from 10.4% in November. However, this was faster than 5.2% seen in December 2021.

The December print was also the slowest in four months or the 7% increase in August 2022.

“Demand for construction materials in December remained buoyant amid the reopening of the economy narrative. Consumers’ plan to remodel, renovate or build new houses continued and the further easing of restrictions has afforded these,” UnionBank Chief Economist Ruben Carlo O. Asuncion said in an e-mail.

Mr. Asuncion noted the fourth quarter was “obviously one of the more intense times for consumers to start building and constructing again.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said wholesale prices eased month on month as construction activity may have been hurt by rising interest rates.

“Rising borrowing costs may have stunted some demand for construction activities. This in turn is helping keep the increase in construction materials in check,” Mr. Mapa said in a separate e-mail.

The central bank raised its benchmark interest rate by a total of 350 basis points (bps) in 2022 to curb inflation. Inflation quickened to a 14-year high of 8.1% in December, bringing the full-year print to 5.8%.

“The lower annual growth in CMWPI was primarily brought about by the downtrend in the heavily weighted index of reinforcing and structural steel at 12.3% during the month, from 12.7% in November 2022,” the PSA said.

Data also showed slower growth in hardware (7.6% in December from 8% in November), plywood (5.8% from 6%), plumbing fixtures (5.9% from 6.7%), and fuels and lubricants (8.6% from 12.6%).

Five commodity groups saw faster annual price growth: sand and gravel (8% in December from 7.8% in November), lumber (7.8% from 7.6%), galvanized iron sheet (17.1% from 16.7%), electrical works (8.1% from 7.8%), and painting works (12% from 11.7%).

Growth in wholesale prices for concrete products and cement was unchanged at 10.5%, along with tileworks (5.9%); glass and glass products (1.6%); doors, jambs, and steel casement (6.4%); and PVC pipes (2.7%).

“With inflation and elevated borrowing costs clouding the outlook for investment activity and sapping purchasing power, expect demand for construction to be capped and prices for materials related to such activities to moderate,” Mr. Mapa said.

RETAIL PRICESMeanwhile, the construction materials retail price index (CMRPI) in Metro Manila averaged 5.8% in 2022, faster than the 1.6% in 2021 and the highest in 14 years or since 9.3% in 2008.

In December, retail prices of building materials eased to 5.6%, from 6.2% in November, and the slowest in nine months or since the 4.8% in March. However, it was faster than the 2.7% in the same month in 2021.

“The slowdown in the annual change of CMRPI was mainly due to the lower annual hikes in the indices of tinsmithry materials at 7% in December 2022, from 8.2% in November 2022; and miscellaneous construction materials at 8.9%, from 10.1%,” the PSA said.

Price growth slowed in carpentry materials (2.9% from 3.1%), electrical materials (3.3% from 3.7%), painting materials and related compounds (5.2% from 5.4%), plumbing materials (5% from 5.5%), and miscellaneous construction materials (8.9% from 10.1%).

Mr. Asuncion said demand for construction materials can remain “strong and stable” at least in the first quarter.

“I expect that there will be a spillover into the first quarter of high demand, but it will be difficult to say this will be true for the succeeding quarters because of the threat of a global recession that can dampen the outlook for construction materials,” he said. — Mariedel Irish U. Catilogo