It was slightly more expensive to build houses in September, with the cost of unleaded gas and diesel pushing up builder expenses even as the cost of labor continued to escalate due to a shortage of experienced workers.
The cost of building components increased 0.8% year to date through September, according to the latest Producer Price Index report from the Bureau of Labor Statistics. This is the smallest such gain since 2019.
While inflation continues to run hot in some parts of the economy, Anirban Basu, the chief economist of the Associated Builders and Contractors, said materials price increases are "no longer at the heart of this bout of excess," pointing instead to a heightened labor shortage that will continue to push costs higher in the months ahead.
"Inflation is driven less by supply chain issues and more by structural labor market dynamics and geopolitics," Basu said. "Many contractors continue to indicate that their primary challenge is securing sufficient levels of workers. That will not change anytime soon and could only be countered by a sharp downturn in construction activity."
In September, prices were flat, following a slight 0.4% increase in August. The PPI for all final-demand goods rose by 0.9% after increasing by 2% in August. Monthly gains in prices for unleaded gasoline and diesel once again drove the growth.
- According to an NAHB analysis of the report, gypsum building material prices fell by 0.7% in September, marking six straight months of decline. Gypsum prices are down 2% over the past 12 months.
- Softwood lumber prices increased 1.3% in September, reversing course after falling 5.3% in August. The index for softwood lumber has fallen 11.2% over the past year and by nearly 50% in the past 18 months.
- The prices of rail and deep-sea freight transportation increased by 0.6% and 0.1%, respectively, in September. The PPI for long-distance freight trucking increased by 0.3%, but the price of local truck transportation of freight fell by 0.5%.
"Over the past year, materials prices have been roughly flat, though certain segments like concrete have continued to experience upward price pressures," said Basu. "Renewed conflict in parts of the world that produce a considerable amount of global energy could put more pressure on contractors during the months ahead, but such things are difficult to predict."
