Prices of Building Materials Decline for Third Consecutive Month in November

A closer look at the Bureau of Labor Statistics November 2022 Producer Price Index (PPI) report, which was released on Friday (12-9-22), with further analysis provided by the National Association of Home Builders (NAHB), reveals that the prices of building materials declined 0.3% in November (not seasonally adjusted). November’s drop follows declines of 0.1% in October and 0.5% in September. The index has declined five out of the past six months for the first time since 2015.

The PPI for goods inputs to residential construction, including energy, declined 0.8% in November. The index was led lower by a 5.3% drop in energy inputs as the PPIs of regular unleaded gasoline fell 6.7% and No.2 diesel fuel declined 4.5%. The NAHB notes that more than 80% of energy inputs to residential construction are made of those two specific items.

The price index of services input to residential construction rose 0.6% in November, the second consecutive monthly increase after six straight months of declining prices. Prices pushed higher by large increases in the prices of financial and real estate services. The PPI for business loans climbed 14.1% in November and the price of brokerage and dealing services soared 24.5%. Trucking and ocean freight also contributed to the upward price pressures.

The full PPI breakdown is as follows:

• Softwood lumber (seasonally adjusted) fell 0.1% in November, the fourth consecutive monthly decline and the seventh decrease in the past eight months. Softwood lumber prices have fallen 42.2% since March.
• Steel mill products prices fell 3.0% in November after declining 5.5% in October. Prices have fallen 22.9% since May 2022, posting a decline each month. The index is currently at its lowest level since May 2021, but the pace of monthly decreases continues to consistently slow.
• Ready-mix-concrete (RMC) increased 1.1% in November. The PPI for RMC has increased 21 of the past 22 months and is up 20.0% over the period. The RMC index has climbed 10.7% year-to-date, the largest November year-to-date increase in the 34-year series.
• Gypsum building materials was 0.5% higher in November—easily offsetting the small decline in October. Prices have increased 11.4% year-to-date, 18% over the past year, and 39.3% since January 2021. The NAHB notes that the rate of increase in gypsum has slowed in 2022 compared to the same period in 2021: The average monthly increase has been 1.0%, while the 2021 average increase was 1.6%.
• Truck, rail, and ocean transportation of freight each increased in November. Truck freight rose 1.0%—ending a five-month streak of declines—while the index for rail increased 0.6% and deep-sea transportation climbed 1.5%.