Producer Price Index Introduced for the Nonresidential Building Construction Sector—NAICS 236222

With the release of data for July 2006, the Bureau of Labor Statistics (BLS) expanded the Producer Price Index (PPI) by introducing an index measuring the changes in output prices for new school construction. This index is classified under a PPI-specific 2002 North American Industry Classification System (NAICS) code, 236222. This index appears in table 5 of the PPI Detailed Report and is available online through the BLS Web site. This index includes data back to December 2005.

The index for NAICS 236222, new school construction, is the second measure developed and published by the PPI as part of its Nonresidential Building Construction (NRBC) initiative. This index was developed using a method similar to the one employed for new warehouse construction, NAICS 236221. That index, introduced with PPI data for July 2005, was the first measure produced as part of the NRBC initiative. For NAICS 236222, the method yields a national weighted-average estimate of output price changes for new K-12 school construction. 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 school building models are developed and specified to represent the schools being constructed in the marketplace. Multiple school 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 change in output price for the total structure. Therefore, the BLS output indexes attempt to measure changes in the input costs for these structures, along with the change in contractor markups.

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

Last Modified Date: August 15, 2006