Lumber Headlines Broad-Based Increases in Building Materials Prices
Prices paid for goods used in residential construction ex-energy rose 2.1% in January (not seasonally adjusted) and have increased 6.8% over the past 12 months, according to the latest Producer Price Index (PPI) report released by the Bureau of Labor Statistics. Building materials (i.e., inputs to residential construction less food and energy) prices have declined just twice since December 2019.
The index for inputs to residential construction, including food and energy, also increased over the month (+2.5%) as energy prices climbed 5.1%.
Prices paid for softwood lumber (seasonally adjusted) rose 13.9%. Lumber prices have remained extremely volatile since the 88.5% increase between April and September 2020. Since falling 22.9% between September and November, softwood lumber prices have risen 28.7%.
The lumber PPI is now just 0.8% lower than the record high set in September. However, data from Random Lengths suggests that—barring a record decline in softwood lumber prices over the next two weeks—the index will increase further in February as prices have continued to climb in the weeks after the January PPI survey data were gathered.
Identical reasoning led us to forecast that “…the index will increase more in January as rising prices in late-December and the first half of January are captured by the BLS survey” in last month’s PPI post.
In addition to nominal price movements and tariffs on Canadian lumber, cross-border purchasers are affected by the strength of the U.S. dollar relative to the Canadian dollar. Not only has the USD weakened 12.8% since March, it has fallen 3.6% since lumber prices began rising again in November.
Prices paid for gypsum products advanced 1.2% in January, more than offsetting the small decline seen in December. The PPI for all gypsum products has increased 2.2% over the past 12 months.
Prices paid for ready-mix concrete (RMC) decreased 0.8% (seasonally adjusted), following a 1.0% increase in December. Similar to softwood lumber prices, RMC has been fairly volatile recently compared to its long-run average.
Prices increased in the South (+1.9%) and Northeast (+0.3%) while they fell in the West and Midwest by 1.0% and 0.2%, respectively (not seasonally adjusted).
Other changes in indexes relevant to home building and infrastructure are shown below.