Building Materials Prices Decline for Second Consecutive Month in October

A closer look at the Bureau of Labor Statistics October 2022 Producer Price Index (PPI) report, which was released on Tuesday (11-15-22), with further analysis provided by the National Association of Home Builders (NAHB), reveals that the price of building materials declined 0.2% in October (not seasonally adjusted), following a 0.5% decline in September. The index has declined four of five months for the first time since 2015.

The PPI for goods inputs to residential construction, including energy, was led 0.2% higher by increased prices for diesel fuel (up 9.5%) and unleaded gasoline (up 5.7%).

The price index of services input to residential construction fell 0.7% in October, the seventh consecutive monthly decline. Prices have fallen a total of 14% since the index last increased in March 2022 and are just 1.4% higher year-over-year.

The full breakdown is as follows:

• The PPI for softwood lumber (seasonally adjusted) fell 1.7% in October following a 3.1% decline in September and a 5.5% decline in August. Softwood lumber prices are 4.4% higher than they were a year ago but have fallen 41.3% since March. The index remains 3.0% above pre-pandemic levels.
• The PPI for Steel mill products prices fell 6.6% in October and have declined 21.6% since May 2022. The index is currently at its lowest level since May 2021, after five straight monthly declines, each of which has been greater than the one before.
• The PPI for ready-mix-concrete (RMC) increased 0.4% in October, but like steel mill products, the pace of increases in RMC have slowed each of the past three months. The RMC index has climbed 9.1% year-to-date, the largest October YTD increase in the series’ 34-year history.
• The PPI for gypsum building materials was 0.2% lower in October—the second monthly decrease since September 2020. The gypsum index is 45.6% higher than its January 2020 reading.
• The PPI for truck, rail, and ocean transportation of freight each declined in October. Truck freight dropped 1.4%—the fifth consecutive monthly decline—while the index for rail declined 0.7% and deep-sea transportation fell 1.8%. Year-to-date, ocean freight has increased 25.2%, while rail has moved 6.5% higher and truck freight has pushed 6.0% higher.