The Bureau of Labor Statistics (BLS) released its Producer Price Index report for June 2022. It said prices for building materials rose 0.3% in the month, seasonally adjusted. The index was 15.1% higher than its level a year earlier.
Overall prices for processed goods for intermediate demand rose 2.3% during the month. This index was 22.2% higher than its level a year ago.
For reference, the changes in these indexes are comparable to a 9.1% increase in the all-items index. consumer price index (CPI-U) for the 12 months ending June. CPI-U rose 1.3% for the month. The housing portion of the CPI rose 5.6% from its level a year ago.
Yield Pro has compiled changes reported by the BLS for our standard building materials price list. It is the prices of materials that directly impact the cost of constructing an apartment building. The middle two columns of the table show the percentage change in price of the product from the previous year (12 MB PC Change) and the percentage change in price from May 2022 (1 MB PC Change). If no price data is available for a given product, the change is indicated as N/A.
The pre-COVID column lists the evolution of current prices of building materials compared to the average price from December 2019 to February 2020, before the pandemic affected the economy. This may give a more accurate picture of the magnitude of recent price increases for materials, such as wood, whose prices have already risen sharply last year, than does the 12MB PC Change column.
|Commodity||12 MB Change of PC||1 MB Change of PC||Pre-covid change|
|Soft plywood products||-36.4||-1.4||131.1|
|Hot rolled steel bars, sheets and sections||35.3||1.0||82.7|
|copper wire and cable||6.1||0.3||43.5|
|Power wire and cable||22.0||-2.1||67.7|
|Plumbing fixtures and fittings||10.0||0.3||14.4|
|Sanitary ware in enameled iron and metal||17.5||0.6||21.4|
|Furnaces and heaters||15.2||0.7||24.9|
|Sheet metal products||21.0||1.4||46.1|
|Roofing and asphalt coating||22.6||3.2||36.8|
|Mineral wool insulation||17.5||1.7||34.6|
The first chart below shows the history of the Wood Products Price Index over the past 37 months. Note that the prices used by the BLS to compile the indices are taken on the Tuesday of the week containing the 13e day of the month. In June 2022, that would have been June 14.
The price of softwood lumber has fallen sharply in the current report. However, as explained below, this price drop is intended to be short-lived. The significant decline in prices reported year over year is primarily attributable to extremely high lumber prices in June of last year. Comparing it to the pre-pandemic price level gives a more realistic idea of how lumber prices have risen over the past two years. While lumber prices soared at the start of the pandemic era, many of our other building materials prices have now seen larger increases from their pre-pandemic levels than lumber.
Markets Insider reported that the timber market price hit a recent low of $528 a day before the BLS collected its June data. Since then, the price has trended higher, closing at $645 on July 12, the day the BLS collected data for its upcoming July PPI report. Therefore, we can expect to see the price of lumber rising in next month’s report. The prices of wood in the futures markets also trended higher during the month. The September 2022 futures contract closed at $679 on July 12, up $151 since our last report. The November 2022 contract closed at $672.
The price of soft plywood products follows the same trend as that of softwood lumber, although its recent price movements are less extreme. Its price rise from pre-pandemic levels remains by far the highest building material price we track.
The following chart below shows the recent history of several other building materials prices. These are relatively simple raw materials whose prices are strongly influenced by those of the materials that compose them. Prices for hot-rolled steel, nails and power wire are now all higher than their pre-pandemic levels than softwood lumber, which was the poster child for increases in prices induced by the pandemic.
The price of asphalt roofing and siding saw the largest month-over-month percentage increase in this report of all the building materials prices we track, despite the month’s upward price revision previous. This continues the steady rise in the price of this material that has been occurring since the start of 2021.
MarketWatch Reports that since our last report, the US NYSE Steel Index is generally down. It closed on July 12 at $1,398, down $208 from its level a month ago. Steel Futures have also declined over the past month. The September 2022 contract closed on July 12, down 13% since our last report and down 9.5% from the July contract level. The November 2022 contract is trading 11% below the July contract level.
The copper price has decreased significantly since our last report on this subject. It closed at $4.18 per pound on June 14, but closed at $3.29 per pound on July 12. This is its lowest level since November 2020.
The aluminum price has also been trending lower since peaking at $3,849 in early March. It closed July 12 at $2,360, down $326 since our last report.
The price variations of several of the most finished products in our sample are illustrated in the final table below. The largest month-over-month price increase for these goods in June was for major appliances, at 2.0%.
The full BLS report can be found here.