Prices for Inputs to New U.S. Residential Construction Declined in September

A closer look at Friday’s (10-11-24), Bureau of Labor Statistics (BLS) Producer Price Index (PPI) release, with a focus on residential construction costs, with additional analysis provided by the National Association of Home Builders (NAHB) reveals that prices for inputs to new residential construction—excluding capital investment, labor, and imports—decreased 0.6% in September. Year-over-year (Sept. 23 – Sept. 24) the PPI was down 0.1% in September after an increase of 1.0% in August.

Input Goods 

The NAHB analysis notes that the goods component has a larger importance to the total residential construction inputs price index, around 60%. The price of input goods to residential construction was down 0.7% in September from August.

Prices for inputs to residential construction, goods less energy, were up 1.5% in September compared to a year ago. This year-over-year growth has continued to slow since April when it was at 2.5% and remains well below growth in September of 2022 when it was at 14.3%. The year-over-year growth in September 2023 was 1.0%, making this year’s growth slightly higher. The index for inputs to residential construction for energy fell 23.5% in September, the largest yearly decrease since 26.1% in July 2023.

Input Services

Prices of inputs to residential construction, services, fell 0.5% in September from August. The price index for service inputs to residential construction can be broken out into three separate components: the trade services component, the transportation and warehousing services component, and the services less trade, transportation, and warehousing component. The most vital component is trade services (around 60%), followed by services less trade, transportation, and warehousing (around 29%), and finally transportation and warehousing services (around 11%). The largest component, trade services, compared to last year was up 0.4% in September after increasing 2.1% in August.