Investigating Price Fluctuation Transmission among Construction Materials

Generally, fluctuation in one material's price can cause a series of chain reactions in the supply chain system, known as price fluctuation transmission, as all materials are interconnected and interrelated. None of the previous studies have investigated price fluctuation transmission among all construction materials. This paper aims to fill this gap in knowledge. The authors collected producer price index (PPI) data for 16 construction materials, modeled the relationship between each pair of materials using vector autoregression technique, and validated the causality using Granger causality test. Network analysis was performed to identify the price fluctuation transmission capacity, susceptibility, and intermediatory capacity for each material. The results showed that the materials with the highest price transmission capacities include (1) "fabricated structural metal products"; (2) "construction sand, gravel, and crushed stone"; and (3) "plastic construction products." Ultimately, it is concluded that significant changes in the price of these materials can be an indication of price escalations in the supply chain and other construction materials. This paper provides industry practitioners with an unprecedented framework that highlights materials that can act as early warning signs for overall price fluctuations in the construction industry.