US Building Materials Costs Continued to Decline in May

A closer look at the Bureau of Labor Statistics’ May Producer Price Index (PPI) report released last Wednesday (6-14-23), with further analysis provided by the National Association of Home Builders (NAHB), reveals that the prices of goods used in residential construction ex-energy and not seasonally adjusted declined 0.1% in May, following a 0.2% decline in April. Year-to-date, the index has gained 0.3%, well below the 10.2% reported in 2021 and 4.9% recorded in 2022.

The price index of goods inputs to residential construction, including energy, dropped 0.5% as energy prices drove the index lower. The index has declined 2.7% over the past 12 months but is 36.0% higher that where it was in January 2020.

The product breakdown for May is a follows:

• Seasonally adjusted, the PPI for softwood lumber declined 3.1% after increasing 6.2% in April. Softwood lumber prices have declined 10 of the past 12 months and are 41.9% lower than one year ago.
• The PPI for gypsum building materials declined 1.1% for the second consecutive month and is down 0.4% year-to-date. Gypsum building materials prices are 4.0% higher year-over-year but at their lowest level since July 2022.
• Ready-mix concrete (RMC) prices were revised down from April in the latest release. As result, prices declined last month for the first time since March 2022. Nevertheless, price growth returned in May as the RMC index rose 1.6%—the largest monthly increase in nearly a year. RMC prices have increased 2.8% year-to-date—the same increase seen through May 2022—and are up 13.0% over the past 12 months.
• Steel mill product price growth continued to accelerate in May as the index rose 5.2%. This follows a 3.5% increase in April and a 1.0% increase in March, after climbing 3.1% in February and March combined. The PPI for steel mill products declined eight consecutive months ending in January 2023, falling 27.9% during the time period. However, prices have climbed 12.4% in the four-month period since.

The PPI for service inputs to residential construction declined 1.0% in May, after climbing 0.5% higher in April. Prices have declined 12.4% year-over-year but have been relatively stable in 2023, down just 0.5% through May 2023.