The price level of inputs to residential construction less energy (building materials) increased 0.1% in August, according to the latest Producer Price Index (PPI) report. Overall construction input prices increased 1.5% on a month-over-month basis.
Residential building material prices have increased 0.2% over the past 12 months, with year-over-year price growth slowing from recent peaks of 4.9% in January 2023 and 14.7% in August 2022. According to an analysis by the NAHB, the 12-month increase in August is the smallest since June 2016.
In an analysis of the PPI, Associated Builders and Contractors chief economist Anirban Basu said the PPI, coupled with the consumer price data report earlier this week, served notice that inflation remains a concern and “price growth continues to be problematic.”
“With labor costs still rising, consumers spending aggressively, oil-producing nations limiting output, and global supply chains being reorganized, there is reason to believe that future readings will also demonstrate excess inflation is here to stay,” said Basu.
The PPI for all final demand goods increased 2% in August, the largest monthly increase in over 12 months, driven by a 10.5% increase in energy prices. The monthly increase of 41.1% for diesel fuel prices broke the previous record set in 1990, according to the NAHB.
The PPI for inputs to residential construction, including energy, increased by 1.3% in August but is unchanged on a year-over-year basis. March was the last month the index increased on a year-over-year basis.
Gypsum building material prices declined for the fifth consecutive month, falling 0.4%. The PPI for softwood lumber decreased 5.3% in August, the first monthly decline in three months. An NAHB analysis indicates softwood lumber prices have fallen by more than half since reaching record high levels in May 2021.
The price index of services inputs, excluding labor, to residential construction increased 0.9% in August. The NAHB said the increase was primarily due to a 4.5% increase in the index for building material retailers’ gross margins, which account for one-third of the services inputs PPI.