Once a source of significant consternation for remodelers, the price and supply of most building materials have been relatively stable in 2023.
Small Changes in Prices
The price of inputs to residential construction less energy was unchanged in September (not seasonally adjusted) after climbing 0.4% in August, according to the Producer Price Index (PPI) report from the Bureau of Labor Statistics. Prices have increased 0.8%, year-to-date (YTD), marking the smallest YTD gain through September since 2019.
A 3.3% surge in energy prices drove up the PPI for all final-demand goods by 0.9% in September after a rise of 2% in August. Monthly increases in unleaded gasoline and diesel fueled the gain.
The PPI for softwood lumber (seasonally adjusted) increased just 1.3% in September. The index has fallen 11.2% over the last year and by nearly 50% over the past 18 months.
Gypsum, Concrete, and Steel
Looking at gypsum building materials, the PPI declined 0.7% in September, the sixth consecutive monthly decrease. Prices are down 2.0% over the past 12 months, but 95% of that decline has taken place over the first nine months of 2023.
The index for gypsum building materials has fallen 1.9%, YTD. That’s quite a contrast from the YTD increases that occurred through September 2021 (15.7%) and September 2022 (11.3%). Those YTD increases were considerably greater than the long-run average for gypsum, exceeded only by the boom years of the early 2000s.
Ready-mix concrete prices gained 0.3% in September after an upwardly revised 1.7% increase in August.
The PPI for steel mill products—the raw materials used to make intermediate and finished steel goods—fell 3.7% in September. Since climbing 12.4% from January through May, steel mill product prices have declined by a total of 9.5% over the four months from June through September. The index is now 12.5% lower than it was one year ago. The PPI for steel mill products has decreased by nearly one-third since doubling during 2021.
Services
The price index of services inputs (excluding labor) to residential construction increased 0.9% in September after edging 0.4% higher in August.
Looking at the producer prices for the transportation of freight, we saw a mix, with the price of rail freight rising 0.6% and the price of ocean transportation rising 0.1%. Also up was the price of long-distance freight trucking (0.3%), while the price of freight moved by local truck transportation was down 0.5%.
Although supply chain bottlenecks have eased in recent months, shortages of some key materials persist. Chief among these is the acute shortage of distribution transformers. Lead times have increased from 12 weeks to 12 months in many cases. As distribution transformers are required to supply power to construction sites, the shortage remains a major liability for the industry.