Producer Price Indexes

Producer Price Indexes Introduced for the Nonresidential Building Construction Sector—NAICS 23811X, 23816X, 23821X, and 23822X

With the release of data for July 2008, the Bureau of Labor Statistics expanded the Producer Price Index (PPI) by introducing indexes measuring the changes in output prices received by four groups of construction trade contractors performing poured concrete, roofing, electrical, and plumbing/HVAC work on nonresidential buildings. These indexes are classified under PPI-specific 2002 North American Industry Classification System (NAICS) codes, 23811X, 23816X, 23821X, and 23822X. Historical data for these industries date to December 2007. These indexes are the final measures to be developed and published by PPI as part of its Nonresidential Building Construction (NRBC) initiative. These indexes appear in table 5 of the PPI Detailed Report and are available online through the BLS website.

In the late 1990s, BLS began the NRBC initiative to develop output price indexes for the nonresidential building construction sector of the U.S. economy. The initiative was funded to yield output price measures for four types of nonresidential building structures and for the work performed by contractors from four trade groups on nonresidential building structures. The initiative is noteworthy for several reasons. It expands coverage into an important sector of the U.S. economy previously not measured by the PPI. These new measures will provide BLS data users with information not available from other sources. The initiative also is important because the Bureau of Economic Analysis of the U.S. Department of Commerce has indicated an interest in using the BLS data to improve its GDP deflator estimates for the nonresidential building construction sector.

Prior to this initiative, neither BLS nor any other public or private entity published output price indexes measuring changes in average U.S. prices for nonresidential building structures. This deficiency in the available macroeconomic statistics measuring the U.S. economy has been a longstanding issue. (See, for example, National Bureau of Economic Research (NBER), The Price Statistics of the Federal Government (New York, Columbia University Press, 1961); and Paul Pieper, "The Measurement of Construction Prices: Retrospect and Prospect," in Fifty Years of Measurement: Proceedings of the Fifth Conference of Research in Income and Wealth (Chicago, University of Chicago Press and NBER, 1991), pp. 293-327.) BLS is following a methodological approach that yields national weighted-average estimates of output price changes for four selected building types and by four categories of specialty trade construction contractors. The approach adopted by BLS is one that is sustainable over time given the constraints imposed by factors such as the PPIs Laspeyres index framework and the fact that the PPI is a voluntary monthly survey completed by profit-maximizing firms.

Table 1 lists the output price indexes BLS developed as part of this initiative, along with their dates of public release.

Table 1. Release Dates: Nonresidential Building Construction PPIs

Index Public release
New warehouse building construction July 2005
New school building construction July 2006
New office building construction January 2007
New manufacturing and industrial building construction January 2008
Nonresidential electrical contractors July 2008
Nonresidential plumbing, heating, and air-conditioning contractors July 2008
Nonresidential roofing contractors July 2008
Nonresidential concrete contractors July 2008

Each of the four special trade indexes are intended to represent national average price movement for that special trade on a combination of new, nonresidential (commercial and industrial only) building construction activities and nonresidential building maintenance and repair work. These indexes exclude residential work as well as additions, renovations and non-building construction. The indexes further exclude pre-construction site preparation work, post-construction landscaping, reclamation work, architectural fees, and building design fees which are not costs incurred when erecting the structure itself.

Each of the four trade contractor indexes is created by aggregating contractor-specific data previously collected for new construction activities for the four building types (warehouses, schools, offices, and industrial buildings) with data separately collected for maintenance and repair work performed by each of the contractors. A detailed description of data collection for new construction activities can be found at: www.bls.gov/ppi/ppinrbc.htm

Collection of the data for maintenance and repair work utilized established PPI procedures and methodologies. Specifically, the maintenance and repair work for which respondents provide data was selected from each firm's recently completed in-scope transactions.

Table 2. Example of a Maintenance and Repair Item Description

Maintenance/Repair Job. Customer name: XYZ, Inc. Customer/Job identification number: 903246-01. Maintenance/repair identification: Scheduled repair on a Built-up Roof (BUR). Nonresidential building type: Warehouse. Size of maintained/repaired area 35,000 sq ft. Reason for service: deterioration of surface coating due to weather damage.

Description Rate # of units/hours Units/hours X rate
Labor $75.00/hr 2 hours $150.00
Shingles $35.25/bundle 100 bundles $3525.00
Truck surcharge $1.10/mile 30 miles $33.00
Subtotal $3708.00
Overhead & Profit 15% $556.20
Total Rate $4264.20

A survey form which includes the item description is sent out monthly to the respondent. On this form, the respondent estimates an updated price using information on current costs and current overhead and profit percentage that would be applied if the identical job were performed in the current month. The respondent is also asked to indicate if any of the characteristics of the job description are no longer offered. Changes in characteristics are evaluated and, if necessary, adjustments made in order to maintain a consistent price basis.

For further information on NAICS 23811X, 23816X, 23821X, or 23822X please contact Frank Congelio at Congelio.Frank@bls.gov or (202) 691-7712.

Last Modified Date: August 19, 2008

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