Building Materials Costs Decline Month-Over-Month in December

A closer look at the Bureau of Labor Statistics December Producer Price Index (PPI) report, released on Wednesday (1-18-23), with further analysis provided by the National Association of Home Builders (NAHB), reveals that the prices of goods used in residential construction ex-energy and not seasonally adjusted declined 0.3% in December—the fourth consecutive monthly decline. After rising an average of 1.8% per month during the first five months of 2022, the index has averaged a monthly decline of 0.1% from June through December.

The price index of services inputs to residential construction was unchanged in December after declining in October and November. Prices rose 5.6% in all of 2022, after climbing 10.8% in 2021. In contrast to building materials, the index for services inputs increased 10.0% in 2022. According to the NAHB, the 2022 increases were almost entirely driven by a large increase in building materials retailers’ gross margins.

The price growth of goods inputs to residential construction, including energy, dropped even more sharply over the year due to a historic increase in fuel prices in 2021. Prices increased 8.2% in 2022, after surging 20.8% in 2021.

Here is the full breakdown:

• The PPI for softwood lumber (seasonally adjusted) fell 6.9% in December, and over all of 2022 the index dropped 26.1%. Since increasing during the first three months of 2022, the softwood lumber index has fallen 45.8%
• Steel mill product prices declined 2.7% in December, marking sixth consecutive months of declines. After soaring 128% in 2021, prices dropped 28.7% in all of 2022 and 25.0% since May.
• The PPI for gypsum building materials decreased 0.2% in December, but for the entire year they increased 17.6%. This is substantially lower than the 23% increase in 2021.
• The trend for ready-mix concrete (RMC) continued its historic pace as the index increased 1.6% in December. The PPI for RMC increased 13.6% in 2022, twice the 2021 increase and nearly seven times its historical average.
• The price of truck and rail transportation of freight declined 1.7% and 0.1%, respectively, in December. The index for ocean transportation of freight increased 0.6% in December. Of the three modes of shipping, the NAHB noted that truck pricing showed the largest slowdown relative to 2021, as the growth trend fell from 17.9% to 8.2%.