The producer price index (PPI) report from the Bureau of Labor Statistics (BLS) stated that construction materials prices were up 0.2 percent month-over-month in September on a seasonally adjusted basis. In addition, last month’s price movement was revised from unchanged to +0.2 percent. The index of components and materials for construction was up 0.1 percent from its year-earlier level.
Overall prices for processed goods for intermediate demand rose by 0.5 percent in the month. This was down from a rise of 2.2 percent last month as the recent run-up in fuel prices moderated. The processed goods for intermediate demand index was 3.7 percent lower than its year-earlier level.
For reference, the changes in these indices compare with a 3.7 percent rise in the all-items consumer price index (CPI-U) for the 12 months ending in September. The seasonally adjusted September CPI-U was up 0.4 percent from August’s level. Energy prices were up 1.5 percent for the month but were down 0.5 percent year-over-year. The shelter portion of the CPI-U was up 0.6 percent for the month and was 7.2 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 August (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||(14.3)||0.7||68.6|
|Hot rolled steel bars, plates and structural shapes||(10.5)||(2.7)||55.1|
|Copper wire and cable||3.6||(0.8)||28.4|
|Power wire and cable||25.1||(3.9)||117.0|
|Plumbing fixtures and fittings||2.2||0.0||17.7|
|Enameled iron and metal sanitary ware||1.2||2.2||21.5|
|Furnaces and heaters||1.9||(0.9)||33.8|
|Sheet metal products||(0.2)||(0.4)||46.2|
|Electrical Lighting fixtures||0.6||0.0||18.1|
|Ready mix concrete||9.8||0.1||31.2|
|Asphalt roofing and siding||3.2||0.8||39.8|
|Mineral wool insulation||(0.9)||(0.5)||39.5|
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 September that would have been September 12. In the October report, the data collection date will be October 10.
The prices for wood products continued to be relatively stable in September. The price index for softwood lumber was reported to drop 1.7 percent drop this month on top of a 0.2 percent downward revision to its price index for August. The price index for soft plywood products was reported to rise 0.7 percent in September, but this was on top of an upward adjustment of 2 percent for the index for the month before.
Looking ahead, NASDAQ reported that the market price of lumber closed on September 12 at $497 and rose to $501 on October 10. Between those dates, prices were as low as $479 and as high as $507. Lumber prices in the futures markets also seem to signal short-term price stability. The November 2023 contract closed on October 10 at $501, while the January 2024 contract closed at $510.
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 have by far the highest increases year-over-year and since the start of the pandemic of any of the construction materials prices we track. While they were reported to fall 3.9 percent this month, the prior month’s price index was adjusted upward by 2.7 percent.
The price index for copper wire and cable was reported to fall for the month, but this was aided by an upward revision to the index for the month before. Compared to its preliminary price index reported for August, the preliminary price index for copper wire and cable for September was up 0.6 percent.
The price index for nails has been trending down for the last year while that for asphalt roofing and siding has been moving upward.
Looking ahead at prices for underlying materials, MarketWatch reported that the NYSE American steel index has been slowly trending lower over the last 30 days. It closed at $1,940 on September 12 and closed at $1,896 on October 10. Meanwhile, steel futures have been trending higher since our last report. The November contract closed 6 percent higher on October 10 than it did on September 12. On October 10, the January 2024 contract closed 4.5 percent higher than did the November contract so the market is predicting that steel prices will rise over the next few months.
The price of copper closed at $3.63 per pound on October 10 down $0.16 since September 12. It had closed as high as $3.82 per pound and as low as $3.55 per pound between those dates.
The price of aluminum staged something of a rebound in late August. It closed on October 10 at $2,223, up $31 from its level on September 12. However, it had spiked as high as $2,328 in early October.
Price changes for several of the more finished goods from our sample are illustrated in the final chart, below.
The biggest reported monthly construction materials price index rise was for enameled iron and metal sanitary ware. However, its 2.2 percent reported rise was matched by a downward revision to the prior month’s index. Comparing preliminary reports for the two months, its price index was unchanged.
An anomaly in the recent data is that the reported price index for plumbing fixtures and fittings has been exactly the same for 5 months. This is also true for the price index for builder’s hardware, which is included in the table above but not in the charts. It seems unlikely that there would be absolutely no change in these indexes over such a long time span.
The full current BLS report can be found here.