Construction materials prices nearly unchanged in July

The producer price index (PPI) report from the Bureau of Labor Statistics (BLS) stated that construction materials prices were up 0.1 percent month-over-month in July, seasonally adjusted. The index of components and materials for construction was down 0.1 percent from its year-earlier level.

Overall prices for processed goods for intermediate demand fell by 0.6 percent in the month. The processed goods for intermediate demand index was 7.8 percent lower than its year-earlier level.

For reference, the changes in these indices compare with a 3.2 percent rise in the all-items consumer price index (CPI-U) for the 12 months ending in July. The seasonally adjusted July CPI-U was up 0.2 percent from June’s level. The shelter portion of the CPI-U was up 0.4 percent for the month and was 7.7 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 June (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.

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 July that would have been July 11. In the August report, the data collection date will be August 15.

While the prices of softwood lumber and of soft plywood products have both surged and plunged during the timespan illustrated in the chart, their prices have moderated recently. Since July 2017, the price of softwood lumber has only risen in line with general prices as measured by the CPI-U. However, softwood lumber prices made the largest upward movement of the construction materials prices that we track in July with a rise of 4.4 percent for the month. While the price of soft plywood products fell for the month, they have risen at twice the general rate of inflation since July 2017.

Looking ahead, NASDAQ reported that the market price of lumber closed on July 11 at $589 and fell to $495 on August 11. Lumber prices in the futures markets indicate that modest price rises may be ahead. The November 2023 contract closed on August 11 at $503, while the January 2024 contract closed at $520.

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.

Power wire and cable prices had the second highest upward movement in July of the construction materials prices that we track with a rise of 3.1 percent. However, this rise  was aided by a slight downward revision to the previous month’s price. Power wire and cable also has by far the largest post-COVID price rise of our materials.

The price of copper wire, which was rising along side that of power wire in the 2021 time frame, has been declining recently. Its post-COVID price rise is now in the middle of the pack for the construction materials prices we track.

The price of hot rolled steel bars and plates declined for the second month in a row after rising earlier in the year. However, it remains the commodity with the third highest post-pandemic price increase of the construction materials prices we track.

Looking ahead at prices for underlying materials, MarketWatch reported that the NYSE American steel index ended the last 30 days at nearly the same place from which it started. It closed at $1,922 on July 11 and closed at $1,917 on August 11. Meanwhile, steel futures have been trending lower since our last report. The November contract closed 9 percent lower on August 11 than it did on July 11.

The price of copper closed at $3.72 per pound on August 11, down $0.05 since July 11. However, it had closed as high as $4.00 per pound between those dates.

The price of aluminum staged something of a rebound in late July. It closed on August 11 at $2,174, up only $7 from its level on July 11. However, it had traded as high as $2,283 on July 31.

Price changes for several of the more finished goods from our sample are illustrated in the final chart, below.

The price of enameled iron and metal sanitary ware was reported to jump 1.3 percent this month. However, that was only because last month’s reported price index was revised lower by 1.3 percent this month.

The price for furnaces and heaters was reported to rise 0.6 percent this month, but last month’s price index was revised lower by 1.2 percent. Therefore, its reported price index for this month is actually lower than that listed for furnaces and heaters in last month’s report.

The full current BLS report can be found here.