Lumber drives construction material prices higher again

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The Bureau of Labor Statistics (BLS) released its producer price index report for August 2020. It showed that the BLS price index of materials and components for construction was up 0.9 percent from July, seasonally adjusted. It was 2.3 percent higher than its year-earlier level.

By contrast, overall prices for processed goods for intermediate demand rose by 0.6 percent. Excluding food and energy, the price index for processed goods for intermediate demand was up by 0.5 percent for the month. The full index was 2.6 percent lower than its year-ago level.

For reference, the changes in these indices compare with a 1.0 percent rise in the all-items consumer price index (CPI-U) for the 12 months ending in July. The monthly increase in the index was 0.6 percent in July.

Yield Pro (PRO) compiled the BLS reported price changes for our standard list of construction commodities. These are commodities whose prices directly impact the cost of constructing an apartment building. The two right hand columns of the table provide the percent change in the price of the commodity from a year earlier (12 Mo PC Change) and the percent change in price from July 2020 (1 Mo PC Change). If no price data is available for a given commodity, the change is listed as N/A.

Commodity

12 Mo PC Change

1 Mo PC Change

Softwood lumber

45.0

16.0

Hardwood lumber

-3.9

0.1

General millworks

2.1

0.1

Soft plywood products

49.3

20.4

Hot rolled steel bars, plates and structural shapes

-8.0

-1.2

Copper wire and cable

3.6

4.5

Power wire and cable

-0.7

1.1

Builder’s hardware

2.0

0.1

Plumbing fixtures and fittings

1.8

0.0

Enameled iron and metal sanitary ware

0.8

-0.1

Furnaces and heaters

4.5

1.5

Sheet metal products

-0.5

-0.2

Electrical Lighting fixtures

-0.6

2.5

Nails

-0.1

0.0

Major appliances

4.4

2.1

Flat glass

-0.4

-0.2

Ready mix concrete

0.9

-0.2

Asphalt roofing and siding

1.7

-1.7

Gypsum products

0.5

0.0

Mineral wool insulation

-5.4

0.3

Softwood lumber prices, both for framing lumber and for plywood products, rose strongly again in August. The surge has taken prices above the levels they reached in 2018 in response to tariffs being imposed on imported lumber. This time around, prices are being driven by supply shortages resulting from lumber mills being shut down due to concerns over the COVID-19 outbreak. Because of this, there is hope that prices will ease when mills ramp up production to catch up with demand. Supporting this view is the fact that lumber futures on the CME for spring deliveries are trading off the highs they reached in late August.

construction material prices lumber
The second chart, below, shows the recent price history of several other construction materials. The prices of these construction materials have been relatively stable in recent months.

Price changes for some of the more finished goods from our sample are illustrated in the final chart, below. The prices of these items have generally been stable recently, disregarding some wild swings which may be due to data collection issues caused by COVID-19 related disruptions to the supply and reporting chains. One exception to this is the prices for major appliances, which have been edging upward amid reports of supply chain issues. These prices will bear watching in future reports.

The full BLS report can be found here.