Building Material Costs Grow Only Marginally in 2023

According to the latest Producer Price Index report, growth in the average price level of inputs to residential construction less energy (i.e., building materials) fell from 15.0% in 2022 to 1.3% in 2023 (not seasonally adjusted). On a monthly basis, building materials prices rose 0.1% in December after increasing 0.1% in November (revised). Monthly price increases averaged 0.2% in 2023, down from 1.5% in 2021 and 0.7% in 2022.

The Producer Price Index for all final demand goods fell 0.4% in December, the third consecutive decline (seasonally adjusted). Most of the decline can be attributed to a 1.2% decrease in the index for final demand energy (SA). For the 12 months ended in December, the PPI for final demand goods less foods and energy increased 1.8% (NSA). The annual average increased 2.8% in 2023, the smallest increase since 2020.

Price growth of goods inputs to residential construction, including energy, declined 0.6% in December and gained 1.0% over the past 12 months. The annual average decreased 0.3% in 2023 after surging 17.7% and 17.3% in 2021 and 2022, respectively.

Softwood Lumber

The PPI for softwood lumber (seasonally adjusted) declined 2.3% in December, the third consecutive decrease and the fourth over the past five months. The index has fallen 14.5% since reaching its 2023 high in July.

On an annual basis, prices declined 31.3% in 2023 after falling 3.2% in 2022. Although the 33.5% two-year decrease is massive in historical terms, prices remain 22.7% above the 2019 level as the index skyrocketed 84.6% between 2019 and 2021.

Gypsum Building Materials

The PPI for gypsum building materials declined 0.3% in December and have not increased since March 2023. The index decreased 2.0% over the past 12 months, a welcome change after the 44.6% increase seen over the two years ending December 2022. 

Ready-Mix Concrete

Ready-mix concrete (RMC) prices decreased 0.2% in November (SA), 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 increased 11.2% in 2023 and 10.3% in 2022 (NSA), combining for the second-largest two-year increase since 2000.

The monthly decrease in the national data was entirely due to a 0.9% price decline in the South as prices in the Northeast, Midwest, and West regions were unchanged.

Steel Mill Products

Steel mill products prices climbed 3.3% in December, the first increase since May. Steel mill products annual average prices declined 16.1% in 2023 after increasing 8.7% in 2022 and the historic 90.3% increase of 2021. Prices are 31.2% lower than their 2021 peak but remain 65.1% higher than they were in January 2020.