US Residential Building Materials Costs Inch Higher in December

A closer look at Friday’s (1-12-24) Bureau of Labor Statistics Producer Price Index (PPI), with additional analysis provided by the National Association of Home Builders (NAHB), reveals the PPI for goods input to residential construction (including energy) increased 0.1% in December after increasing a revised 0.1% in November.

Monthly price increases averaged 0.2% in 2023, down from 0.7% in 2022 and 1.5% in 2021. Not seasonally adjusted, the PPI for goods input into residential construction (including energy) decreased from 15.0% in 2022 to 1.3% in 2023.

The breakdown by product is as follows:

• Seasonally adjusted, the PPI for softwood lumber fell 2.3% in December—the third consecutive monthly decline and the fourth over the past five months. Since reaching its 2023 high in July, the index has shed 14.5% in value. The NAHB notes that on an annual basis, softwood lumber prices declined 31.3% in 2023, after declining 3.2% in 2022. Although the 33.5% two-year decline is massive in historical terms, prices remain 22.7% above the 2019 level as the index rocketed 84.6% higher between 2019 and 2021, NAHB said.
• The PPI for gypsum building materials decreased 0.3% in December and has not increased since March 2023. The index decreased 2.0% year-over-year, a welcome change after the 44.6% increase seen over the two years ending in December 2022.
• The PPI for ready-mixed concrete (RMC) decreased 0.2% seasonally adjusted in November, just the fourth decline over the last 36 months. Year-over-year, price growth decelerated for the second consecutive month, falling from 9.3% in November to 7.8% in December. The average price of RMC (not seasonally adjusted) increased 11.2% in 2023 and 10.3% in 2022, combining for the second-largest two-year increase since 2000.
• The PPI for steel mill products increased 3.3% in December, the first increase since May. Steel mill product average prices fell 16.1% in 2023 after increasing 8.7% in 2022, and the historic 90.3% increase in 2021. The NAHB notes that steel mill product prices are 31.2% lower than their peak in 2021 but remain 65.1% higher than they were in January 2020.