Price Trends in Building Materials
According to the latest Producer Price Index (PPI) report, the price of inputs to residential construction—excluding energy—rose by 0.2% in November 2023. This follows a 0.4% decline in October. Year-to-date, building materials prices have increased by 0.8%, marking the smallest year-to-date gain since 2019, when prices fell by 0.2% during the first 11 months. Since February 2020, the cost of building materials has surged by 36.0%.
Trends in Final Demand Goods and Services
The PPI for all final demand goods was unchanged in November, following a 1.4% drop in October. Although the PPI for final demand energy fell by 1.2%, it was offset by increases in the prices of final demand foods and other goods. Over the 12 months leading up to November, the PPI for final demand goods, excluding food and energy, decreased by 1.8%. Similarly, the PPI for final demand services remained unchanged for the second consecutive month.
Ready-Mix Concrete Prices
Ready-mix concrete (RMC) prices increased by 0.1% in November. However, the price growth has slowed in recent months, with year-over-year price growth decelerating from a high of 13.3% in May 2023 to 9.4% in November. Regionally, ready-mix concrete prices declined by 0.6% in the Northeast and Midwest, but increased by 0.5% in the South and 0.7% in the West. Over the past year, the Midwest saw the largest increase in prices, with a 14.1% rise, while the West experienced the smallest increase, at 3.1%.
Gypsum Building Materials
The price of gypsum building materials remained unchanged in November, following a slight decline in October. Year-to-date, prices have decreased by 1.6%, and prices are now 1.9% lower than they were in November 2022. After peaking earlier in the year, the price growth of gypsum building materials has slowed significantly, turning negative in August.
Steel Mill Products
The price of steel mill products saw a 1.5% decrease in October, continuing a six-month decline that has totaled 13.9%. Year-to-date, the price of steel mill products has dropped by 2.9%, which is a stark contrast to the 26.0% decrease in 2022 and the 115.7% surge in 2021. The price of steel mill products is now roughly one-third lower than its peak in December 2021.
Softwood Lumber
Softwood lumber prices experienced a notable decline in November, with the price index dropping by 5.8%. This follows a 2.7% decline in October, marking a total 12-month decrease of 19.7%. Lumber prices are now at their lowest point since March 2020, reflecting continued volatility in the market.
Services and Freight Prices
The price index for services inputs to residential construction, excluding labor, fell by 0.1% in November. Despite this dip, the index has increased by 2.9% year-to-date. The transportation of freight also showed mixed results in November. Rail and deep-sea (ocean) freight transportation saw price increases of 0.4% and 1.6%, respectively, while truck transportation prices declined by 0.6%. Year-to-date, truck and deep-sea freight prices have decreased by 5.3% and 4.1%, respectively.
Building Materials Retailers and Wholesalers
Retailers and wholesalers of building materials also saw changes in their gross margins. The price index for building materials retailers fell by 0.4%, while wholesalers experienced a 1.0% decrease. Over the past year, the price index for building materials retailing has increased by 3.4%, while the wholesaler index declined by 6.8%.
Conclusion
Building material prices have shown mixed results in recent months, with some materials like ready-mix concrete and softwood lumber experiencing price declines, while others, like gypsum building materials and freight transportation, have remained relatively stable. Despite the fluctuations, the overall cost of construction inputs continues to rise, adding to the challenges faced by the residential construction industry in 2023. As the market adjusts, industry stakeholders will need to monitor these trends closely to adapt to the evolving cost landscape.