Construction materials price rises outpace CPI in April

The Bureau of Labor Statistics (BLS) released its producer price index report for April 2022. It stated that construction materials prices were up 0.8 percent in the month, seasonally adjusted. The index was 21.2 percent higher than its year-earlier level.

Overall prices for processed goods for intermediate demand rose by 2.2 percent in the month. This index was 21.9 percent higher than its year-ago level.

For reference, the changes in these indices compare with an 8.3 percent rise in the all-items consumer price index (CPI-U) for the 12 months ending in April. The CPI-U was up 0.3 percent for the month. The shelter portion of the CPI was up 5.1 percent from its 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 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 March 2022 (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 commodity prices relative to the average of prices from 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 year, than does the 12 Mo PC Change column. 

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 April 2022 that would have been April 12.

In April, the highly volatile price of softwood lumber fell by the largest percentage of any of the construction materials prices that we track. Also, the April to June period of last year was one where softwood lumber prices were exceptionally high. This high basis for comparison contributed to a reported decline in the price of softwood lumber for the year despite the price nearly doubling from its pre-pandemic level.

The market price of lumber reached a recent peak of $1,464 on March 3 before declining through mid-April. However, the price has moved generally upward since then, closing at $1,007 on May 11. This is up $133, or 15 percent, since our last report. Lumber prices in the futures markets surged then waned over the past month, leaving them near the levels at which they began. The July 2022 contract closed at $783 on May 11. The September 2022 contract was at $770, up $5 over the last month.

In April, soft plywood products prices were reported to be up 0.2 percent, although the rise would have been 0.5 percent without the revision made to March’s price level. Soft plywood prices were up 175 percent from their level around January 2020, by far the largest increase of any of the construction materials prices we track.

The prices of general millworks and hardwood lumber continue to move steadily higher in line with the overall rise in construction materials prices.

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

This month, the prices of many of the metal-based construction materials rose at a more moderate pace. The price for hot-rolled steel bars would have been reported to fall and the price for copper wire would have reported a smaller rise except for downward revisions made to last month’s prices. However, the price of nails jumped by a reported 5.1 percent during the month. This increase would have been 5.7 percent without the revision made to the prior month’s price level.

MarketWatch reports that the NYSE American steel index has generally trended lower since our last report. It closed on April 13 at $1,639, down $405 from its level of a month ago. Steel futures have also moved lower over the last month. The July 2022 contract closed on May 11 at $1,105, down $235 since we last reported on it. The September 2022 contract is at $1,071.

The price of copper spiked shortly after Russia’s invasion, reaching $4.94 per pound on April 4. However, it has been trending lower since April 18 and it closed on May 11 at $4.21.

The price of aluminum rose steadily starting last December, reaching a peak of $3,849 on March 4. It has been trending downward since March 23 and closed on May 11 at $2,778. This is down $470, or 14 percent, from its level of one month earlier.

While not included on the chart, the price of mineral wool insulation took a jump in April, posting the largest monthly price increase of any of the construction materials on our list.

Price changes for several of the more finished goods from our sample are illustrated in the final chart, below. The table above indicates that major appliances had the largest price increase for the month. However, when compared to the unrevised price reported for March electrical lighting fixtures had the largest increase, rising 4.1 percent, followed by plumbing fittings and fixtures, whose prices rose 3.6 percent.

The full BLS report can be found here.