Producer Price Index for August With a Focus on Building Materials Prices

A deeper look into the Bureau of Labor Statistics (BLS) August Producer Price Index (PPI) released on Thursday (9-14-23), with a focus on building materials and additional analysis provided by the National Association of Home Builders (NAHB), reveals that the price level of inputs into residential construction less energy (i.e., building materials) ticked up 0.1% in August, not seasonally adjusted.

The PPI for goods inputs to residential construction including energy rose 1.3% in August but is unchanged year-over-year. March was the last month in which the index had a posted an increase.

The breakdown by building product is as follows:

• The PPI for gypsum building materials fell for the fifth consecutive month, declining 0.4% in August. Prices have decreased 0.9% over the past year, making this the first 12-month decline since September 2020.
• The PPI for steel mill products (i.e., the raw materials used to make intermediate and finished steel goods) declined 0.5% in August after falling 4.7% in July. Since climbing 12.4% between January and May, prices have declined 5.6%.
• The PPI for softwood lumber (seasonally adjusted) declined 5.3% in August—the first monthly decline to be recorded in the last three months. The softwood lumber index has fallen by more than 50% since reaching its record high in May 2021.
• The PPI for ready-mix concreted (RMC) increased 0.6% in August after posting a 0.1% gain in July. Like gypsum building materials prices, monthly price increases for RMC have noticeably slowed in 2023. The year-over-year change is the smallest since May 2022.
• The PPI for services inputs (excluding labor) to residential construction increased 0.9% in August, following a 1.5% increase in July. The increase was primarily due to a 4.5% increase in the index for building materials retailers’ gross margins which account for nearly one-third of the service inputs to the PPI. The NAHB notes that while the index has increased 9.0% year-to-date, it is up 17.2% over the past three months.
• The PPI for the transportation of freight reversed course in August. The prices of rail freight was up 0.4%. The price for truck freight was up 1.6%, while the price of deep-sea transportation of freight increased 1.8% during the month of August. Even after these increases, the NAHB notes that each index level is lower than it was in August 2022.