US Building Materials Costs in Residential Construction Fell in June

A closer look at the Bureau of Labor Statistics June Producer Price Index (PPI) report (7-13-23), with further analysis provided by the National Association of Home Builders (NAHB), reveals that the prices of good used in residential construction, including energy, have decreased 3.6% over the past 12-months—the largest 12-month decline since October 2009.

The breakdown of the PPI for June is a follows:

• Seasonally adjusted, the PPI for softwood lumber increased 3.9% in June—the second increase over the past 3 months. Although prices are up 7.2% over the period, the index has declined 20.9% over the past year and has decreased by more than half since its June 2021 peak.
• The PPI for gypsum building materials declined 0.3% in June, after declining 1.1% in both April and May. Other than lumber, no other building material posted 12-month price increases as large of those of gypsum in building products in 2021 and 2022. However, over the past 9-months the increase in gypsum products has slowed from 20.3% to 3.0%.
• Ready-mix concrete (RMC) prices rose 0.5% in June. The PPI for RMC has increased each of the last 15 months—and 27 of the last 30—and has climbed 12.3% year-over-year. On a positive note, the price growth slowed 0.8 percentage points over the month, and the average monthly increase has declined from 1.0% in 2022 to 0.7% in 2023.
• Steel mill product price growth declined 0.6% in June, following a 4-month period during which steel mill product prices climbed 12.4%. The NAHB notes that even after that period of rising prices, the index is 18.0% lower than in June 2022.
• The PPI for service inputs to residential construction, excluding labor, increased 0.2% in June after posting a 1.0% decline in May. Prices have declined 8.8% year-over-year but have stabilized in 2023, although down 0.1% through June.
• The PPI for trucking freight declined 2.1% in June, while rail transportation fell 0.4%. Deep sea (i.e., ocean) freight rose 0.4%. Year-over-year, trucking freight prices (including both long-distance and local hauls) have declined 13.7%. The NAHB notes that the 12-month decline in trucking prices is the largest decline since the inception of the data series in 2009.

The price of services inputs, excluding labor, to residential construction increased 0.2% in June after a 1.0% decline in May. Prices have declined 8.8% over the past year but have stabilized in 2023, down 0.1% through June.