Lumber and Steel Bring Building Material Costs Down Further

According to the latest Producer Price Index report, the price level of inputs to residential construction less energy (i.e., building materials) declined 0.1% in October (not seasonally adjusted) following a 0.2% increase in September.  The index has increased 1.0%, year-to-date, marking the smallest YTD gain through October since it fell 0.1% over the first 10 months of 2019, according to analysis from the National Association of Home Builders.

The Producer Price Index for all final demand goods decreased 1.4% in October after increasing 0.9% in September (SA). More than 80% of the decline resulted from a 15.3% decrease in gasoline prices. The PPI for final demand services was unchanged over the month.

Gypsum Building Materials
The PPI for gypsum building materials edged slightly lower in October.  Gypsum building materials prices last increased in March 2023 and have declined 3.5% in the seven months since (NSA). Prices are now 1.4% lower than they were in October 2022.

Year-to-date through October, the index for gypsum building materials has fallen 1.6%. In contrast, the index surged 10.9% and 17.9% over the first 10 months of 2022 and 2021. The YTD October increase has averaged 2.8% since 1995.

Steel Mill Products
The price of steel mill products decreased 2.5% in October (SA). Steel mill products prices have declined each of the past five months by a total of 12.5%, reaching the lowest level since March 2021.

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.

Softwood Lumber
The PPI for softwood lumber decreased 2.8% in October following a 1.3% increase in September (SA). The index has fallen 12.1% over the last year and is 52.3% lower than the record high reached in 2021.

Ready-Mix Concrete
Ready-mix concrete (RMC) prices gained 0.8% in October after an upwardly revised 2.1% increase in September (seasonally adjusted). Year-over-year price increases have reaccelerated over the past three months after slowing to 10.2% in July.

Services
The price index of services inputs to residential construction, excluding labor, climbed 0.3% in October after increasing 0.7% in September (not seasonally adjusted).

Freight Prices
Changes in producer prices for the transportation of freight were mixed in October. The prices of rail and truck transportation of freight rose 1.4% and 1.1% (SA), respectively. The PPIs for long-distance and local freight trucking both increased.

Producer prices for ocean transportation of freight fell sharply (-11.4%) in October, the second decline in as many months. The index has decreased 17.4% since August 2023 but remains nearly 30% higher than its historical average.

Year-to-date, the prices of rail, truck, and deep-sea transportation of freight have fallen 0.1%, 4.3%, and 15.0%, respectively.

Building Materials Retailers and Wholesalers
The PPI for wholesalers’ gross margins—which makes up 6.6% of the index for services inputs to residential construction—increased 1.4% in October while retailers’ margins were unchanged (SA). Over the past year, the PPI for building materials retailers has climbed 7.5% while the index for wholesalers has declined 5.6%.