Producer Price Indexes

Producer Price Index Introduced for the Nonresidential Building Construction Sector—NAICS 236223

With the release of data for January 2007, the Bureau of Labor Statistics (BLS) expanded the Producer Price Index (PPI) by introducing an index measuring the changes in output prices for new office building construction. This index is classified under a PPI-specific 2002 North American Industry Classification System (NAICS) code, 236223. This index appears in table 5 of the PPI Detailed Report and is available online through the BLS Web site. This index series includes data back to June 2006.

The index for NAICS 236223, New Office Building Construction, is the third measure developed and published by PPI as part of its Nonresidential Building Construction (NRBC) initiative. In July 2005, PPI introduced an index for NAICS 236221, New Warehouse Building Construction, and in July 2006 an index for NAICS 236222, New School Building Construction, was introduced. Indexes created under the NRBC initiative yield a national weighted-average estimate of output price changes. The approach adopted by BLS is one that will be sustainable over time given the constraints imposed by factors such as the PPI’s Laspeyres index framework and the fact that the PPI is a voluntary monthly survey completed by profit-maximizing firms.

BLS uses a method in which office building models are developed and specified to represent the offices being constructed in the marketplace. Multiple office models were developed to accommodate variations in building design. The building models are described as a series of unique production elements or "assemblies" in BLS terminology. Each building assembly represents a building construction activity that can be fully defined as a unique portion of the total project. Each assembly is made up of unit-price components that define the specific type and quantity of materials, labor, and equipment necessary for the assembly’s installation.

A professional cost-estimating firm developed the building models under BLS direction. To achieve an output price, BLS combines the detailed material and installation (labor and related equipment) cost data, which are updated quarterly by the cost-estimating firm, with margin (overhead and profit) data collected monthly by BLS directly from building construction contractors. BLS aggregates output price changes captured at the assembly level each month to represent the changes in output prices for the total structure. Therefore, the BLS output indexes attempt to measure changes in the input costs for these structures, along with changes in contractor markups.

For more information on the NRBC initiative and for more details on the methodology BLS is using to develop output price indexes for the nonresidential structures included in the initiative, please go to www.bls.gov/ppi/ppinrbc.htm.

For further information on NAICS 236223, please contact Frank Congelio at Congelio.Frank@bls.gov or (202) 691-7712.

Last Modified Date: February 23, 2007

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