The December producer price index (PPI) report from the Bureau of Labor Statistics (BLS) stated that construction materials prices fell 0.3 percent in the month, seasonally adjusted, the fourth monthly decline in a row. However, the index was still 7.6 percent higher than its year-earlier level.
Overall prices for processed goods for intermediate demand fell by 2.8 percent in the month driven by a 10.9 percent drop in prices for fuels and lubricants. The processed goods for intermediate demand index was 4.7 percent higher than its year-ago level.
For reference, the changes in these indices compare with a 6.5 percent rise in the all-items consumer price index (CPI-U) for the 12 months ending in December. The seasonally adjusted December CPI-U was down 0.1 percent from November’s level. However, the shelter portion of the CPI-U was up 0.8 percent for the month and was 7.5 percent higher than its year-ago level.
Yield Pro compiled the BLS reported changes for our standard list of construction materials prices. These are prices of materials which 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 December 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 construction materials 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 materials, such as lumber, whose prices were already rising sharply last year, than does the 12 Mo PC Change column.
|Commodity||12 Mo PC Change||1 Mo PC Change||Pre-covid Change|
|Soft plywood products||(3.0)||(0.9)||75.9|
|Hot rolled steel bars, plates and structural shapes||3.4||(2.4)||65.2|
|Copper wire and cable||(6.5)||1.2||26.8|
|Power wire and cable||20.6||3.4||96.4|
|Plumbing fixtures and fittings||9.4||0.0||15.8|
|Enameled iron and metal sanitary ware||12.4||0.8||21.5|
|Furnaces and heaters||17.7||0.0||36.2|
|Sheet metal products||8.0||(0.1)||45.8|
|Electrical Lighting fixtures||2.6||0.0||17.5|
|Ready mix concrete||13.6||1.4||23.0|
|Asphalt roofing and siding||11.7||0.4||37.0|
|Mineral wool insulation||14.4||0.1||40.3|
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 13th day of the month. In December 2022 that would have been December 13. In January 2023, the data collection date will be January 10.
The prices of the four categories of wood products we track either fell or remained unchanged this month. However, last month’s reported price for softwood lumber was revised higher by 1 percent and the price for soft plywood products was revised lower by 2.7 percent in this month’s report so the price drop from the preliminary levels reported last month was smaller for softwood lumber but larger for plywood than what is shown in the table above.
Markets Insider reported that the market price of lumber generally trended lower in the month of December but has been moving higher in January. It closed on January 10 at $348 before leaping higher on January 17 when it closed at $430. These prices compare to the December 13 close of $406. Lumber prices in the futures markets fell for much of the last month before rebounding over the last week. The March 2023 contract closed at $428 on January 17, up $15 since our last report. The May 2023 contract closed at $431.
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.
The prices for several of these commodities made significant moves in the last month. A prime example is that of power wire and cable. Not only was the price for this commodity reported to be up by 3.4 percent but December’s price was revised higher by 12.7 percent. This was by far the largest revision to any of the prices we track. Last month’s price for copper wire was also revised higher by 2.8 percent, the second largest revision to our commodities list. By contrast, the price of hot rolled steel bars was down 2.4 percent for the month. However, as discussed below, the underlying price of steel has been rising so this price decline may be reversed next month.
Looking at prices for underlying materials, MarketWatch reports that the NYSE American steel index has been moving higher in January after trading in a narrow range in December. It closed on January 10 at $1,889, up $108, or 6 percent, from its level of a month ago. It has continued to move higher over the last week, closing at $1,943 on January 17. Steel futures have also moved higher since mid-December. The March 2023 contract closed on January 17 up 5 percent from its level on December 13. The May 2023 contract closed up 7 percent over the same time frame.
The price of copper has also risen in the new year. It closed at $3.84 per pound on December 13 but it closed at $4.22 per pound on January 17.
The price of aluminum moved higher since our last report. It closed on December 13 at $2,461 but rose to $2,616 by January 17.
Price changes for several of the more finished goods from our sample are illustrated in the final chart, below.
Several of these construction materials prices were unchanged for the month. However, the price of enameled iron products was up by 0.8 percent for the month while the price for major appliances was up 2 percent.
The full BLS report can be found here.