US Building Materials Costs in Residential Construction Inch Lower in October

A closer look at the Bureau of Labor Statistics June Producer Price Index (PPI) report released on Wednesday (11- 15- 23), with further analysis provided by the National Association of Home Builders (NAHB), reveals that the prices of good used in residential construction, less energy, fell 0.1% in October, not seasonally adjusted, following a 0.2% increase in September. Year-over-year, the index has increased 1.0%, marking the smallest gain year-to-date since it declined 0.1% over the first nine months of 2019.

For October, the PPI breakdown for construction materials is a follows:

• Seasonally adjusted, the PPI for softwood lumber decreased 2.8% in October, following a 1.3% increase in September. Year-over-year, the index has declined 12.1% and is 52.3% lower than the record high reached in 2021.
• The PPI for gypsum building materials moved slightly lower in October. Gypsum building materials prices last posted an increase in March and have declined 3.5% over the seven months since. Prices are now down 1.4% from October 2022.
• Ready-mix concrete (RMC) prices rose 0.8% in October, following an upwardly revised 2.1% increase in September. Year-over-year, price increases have reaccelerated over the past two months after slowing to 10.2% in July.
• Steel mill product pricing (i.e., the raw materials used to make intermediate and finished steel goods) declined 2.5% in October. Steel mill products prices have declined each of the past 5 months by a total of 12.5%, reaching the lowest level since March 2021. The NAHB notes the PPI for steel mill products is roughly one-third lower than the cycle peak reached in 2021 but remains more than 60% higher than the pre-pandemic level.

The PPI for service inputs to residential construction, excluding labor, increased 0.3% in October, after increasing 0.7% in September.

The PPI for trucking freight increased 1.1%, while rail transportation rose 1.4%. The PPI for ocean transportation of freight declined 11.4% in October, the second decline in as many months. Since August, the index for ocean transportation has decreased 17.4% but remains 30% higher than its historical average. The NAHB reports that year-to-date, the price of rail, truck, and deep-sea transportation of freight have declined 0.1%, 4.3%, and 15.0%, respectively.