Prices for Inputs to New US Residential Construction Declined in September

A closer look at Friday’s Bureau of Labor Statistics (BLS) Producer Price Index (PPI) report, with a focus on residential construction costs and 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, the PPI was down 0.1% in September after an increase of 1.0% in August.

Input Goods

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

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 (2.5%) and remains well below growth in September 2022 (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. The price index for service inputs to residential construction can be broken out into three separate components: trade services, transportation and warehousing services, and services less trade, transportation, and warehousing. 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.