Construction materials prices continue to climb

The Bureau of Labor Statistics (BLS) released its producer price index report for January 2022. It showed that construction materials prices were up 2.9 percent in the month, seasonally adjusted. The index was 23.6 percent higher than its year-earlier level.

Overall prices for processed goods for intermediate demand rose by 1.7 percent in the month. The index was 24.1 percent higher than its year-ago level.

For reference, the changes in these indices compare with a 7.5 percent rise in the all-items consumer price index (CPI-U) for the 12 months ending in January. The CPI-U was up 0.6 percent for the month. The shelter portion of the CPI was up 4.4 percent from the year-ago level.

Yield 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 center 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 December 2021 (1 Mo PC Change). If no price data is available for a given commodity, the change is listed as N/A.

The pre-COVID column lists the change in the current construction materials prices relative to the average prices in December 2019 through February 2020, before the pandemic impacted the economy. This may give a truer idea of the magnitude of the recent price increases for commodities, such as lumber, whose prices were already rising sharply last summer, than does the 12 Mo PC Change column. 

Prior to last year, the price indexes for individual commodities published by the BLS were almost never revised after they were released. However, in recent months, revisions have been made to many of the construction materials price indexes, some of them significant. These revisions will be discussed below.

The first chart, below, shows the price index history for wood products over the past 37 months. Note that the prices used by the BLS in compiling the indexes are collected on the Tuesday of the week containing the 13^th day of the month. In January 2022 that would have been January 11.

In January, the price of softwood lumber once again saw the largest monthly percentage increase of the construction materials prices we track, rising 24.4 percent.

The market price of lumber dropped slightly in late January but has rebounded in February, closing at $1,291 on February 15. This is up approximately $80 since our last report. Lumber prices in the futures markets have been moving up in line with the rise in the spot price. The July 2022 contract was trading at $1,148 in mid-January, up $60 over the last 4 weeks. The thinly traded September 2022 contract was at $1,021, down $4 over that time.

The price of soft plywood products had the second highest increase in January of the commodities we track, both on a month-over-month basis and also relative to its pre-pandemic price level. The price index was up 13.6 percent in the month and up 106 percent from its level around January 2020. The December price index for these products was also revised upward by 1.8 percent, so the January price index was actually up 15.7 percent from the preliminary level reported last month.

The prices of hardwood lumber and of general millworks continue to move steadily higher, although at a much slower pace than that of either softwood lumber or of plywood products.

The next chart, below, shows the recent history of several other construction materials prices. These are prices of relatively simple commodities which are strongly driven by the prices of the materials of which the commodities are comprised.

The price indexes for copper wire and for power wire fell during January despite the indexes for the prior month being revised downward. The preliminary price index for December for copper wire and cable was revised downward by 0.9 percent this month while that for power wire and cable was revised downward by 0.8 percent.

The prices of the steel-based commodities we track, like hot-rolled steel bars, sheet metal products and nails, are all up significantly from their pre-pandemic levels and all posted significant price gains for the month.

MarketWatch reports that the NYSE American steel index fell in late January but recovered in February. It closed on February 15 at $1,721, not significantly different from its price in mid-January when the PPI data was captured. Steel futures are down slightly from when we last reported on them. The April 2022 contract is now priced at $981, down from $1,074 last month. The July 2022 contract is now at $955.

The price of copper has shown day-to-day volatility but closed on February 15 at $4.54, nearly the same price it had on January 12.

The price of aluminum has been moving higher since mid-December. It closed on January 15 at $3,203, up nearly $300 from its close on January 12.

The December price index of asphalt roofing and siding was revised upward by 6.3 percent. This erased the fall in this index that was reported last month. The price of gypsum products resumed its steady rise which has been underway since late 2020.

Price changes for several of the more finished construction materials from our sample are illustrated in the final chart, below. The price index for electrical lighting fixtures took the biggest fall of those we track this month with a 3.5 percent decline. The price index for furnaces and heaters rose 3.6 percent this month on top of an upward revision of 1.5 percent made to last month’s index. The January rise in the price index for enameled iron and metal sanitary ware appeared to be only nominal, but this is partly because the December index was revised upward by 3.6 percent.

The full BLS report can be found here.