Inflation in Building Materials Used in Residential Construction Moderated in September

A closer look at the Bureau of Labor Statistics (BLS) September Producer Price Index released on Thursday (10-12-23), with a focus on building materials and construction costs and additional analysis provided by the National Association of Home Builders, reveals that the prices of inputs into residential construction less energy (i.e., building materials) was unchanged in September (not seasonally adjusted) after climbing 0.4% in August. Year-to-date, prices have increased 0.8%, the smallest January–September gain since 2019.

The breakdown by product is as follows:

• The PPI for softwood lumber (seasonally adjusted) increased 1.3% in September, following a 5.3% decline in August. The softwood lumber index has fallen 11.2% over the last year and by nearly half over the past 18 months.
• The PPI for gypsum building materials decreased 0.7% in September, the sixth consecutive monthly decline. Prices for gypsum products are down 2.0% over the past 12 months, but the NAHB notes that 95% of the decreases have taken place in 2023.
• The PPI for steel mill products (i.e., the raw materials used to make intermediate and finished steel goods) declined 3.7% in September—a steeper decline than August. Since climbing 12.4% higher between January and May, prices have declined each of the past four months by a total of 9.5%.
• The PPI for ready-mix concrete (RMC) gained 0.3% in September after an upwardly revised 1.7% increase in August. With a year-over-year increase of 9.7%, September was the first month since May 2022 in which the 12-month gain has been less than 10%.
• The PPI for services input (excluding labor) to residential construction increased 0.9% in September, after inching 0.4% higher in August.
• The PPI for the transportation of freight were mixed in September. The price of rail freight increased 0.6%, while deep-sea transportation of freight inched 0.1% higher.
• The PPI for long-distance freight trucking also increased 0.3%, but the price of local truck transportation of freight fell 0.5%. Year-to-date, the price of rail freight has declined 1.5%, the price of truck freight fell 7.0%, and deep-sea transportation of freight posted a 7.3% decline.