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%.

FEA compiles the Wood Markets News from various 3rd party sources to provide readers with the latest news impacting forest product markets. Opinions or views expressed in these articles do not necessarily represent those of FEA.