Materials Prices Post Record Year-to-Date Increase

According to the Bureau of Labor Statistics' latest Producer Price Index (PPI) report, the prices of goods used in residential construction (excluding energy) climbed 0.8% in October, following two months of declines. Building material prices have increased 12.2% year to date, after climbing 4.5% over the same period in 2020.

Specific increases include:

• Softwood lumber increased 9.1% in October (seasonally adjusted) — its first monthly increase since May.
• Ready-mix concrete climbed 0.6% in October after falling 0.5% in September, and is up 4.8% year to date — its largest year-to-date increase in October since 2006.
• Gypsum products increased 2.1% in October — its eighth consecutive monthly increase. Prices have increased 19% year to date.
• Steel mill products experienced a smaller gain than the previous two months with a 4.8% increase in October, but prices are still up 116.9% year to date.

Prices for services, meanwhile, have decreased for the fourth consecutive month by a total of 10.5% over that time period. The decline can be attributed to a 14.6% drop in the wholesale and retail indexes, which account for roughly two-thirds of the PPI for "inputs to residential construction, services."

The trade services PPI measures changes in the nominal gross margins for goods sold by retailers and wholesalers, of which hardware and building materials retailers comprise most of the trade services included as residential construction inputs.

The PPI for building materials retailers decreased 2.6% in October, while nominal gross margins for building materials wholesalers increased 4.8%.

David Logan, NAHB director of tax and trade policy analysis, provides more in this Eye on Housing post.