Building material prices continue to climb
the Bureau of Labor Statistics (BLS) released its Producer Price Index report for January 2022. It showed that prices for building materials rose 2.9% in the month, seasonally adjusted. The index was 23.6% higher than its level a year earlier.
Overall prices for processed goods for intermediate demand rose 1.7% during the month. The index was 24.1% higher than its level a year ago.
For reference, the variations in these indexes can be compared to a 7.5% increase in the all-items consumer price index (CPI-U) for the 12 months ending in January. CPI-U rose 0.6% for the month. Housing’s share of the CPI rose 4.4% from its level a year ago.
Yield Pro has compiled the price changes reported by the BLS for our standard list of building products. These are raw materials whose prices directly impact the construction cost of an apartment building. The center columns of the table show the percentage change in product price from the previous year (12 MB PC Change) and the percentage change in price from December 2021 (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 the current prices of building materials compared to the average prices from December 2019 to February 2020, before the pandemic affected the economy. This may give a fairer idea of the magnitude of recent price increases in commodities, such as lumber, whose prices have already risen sharply last summer, than does the 12MB PC Change column.
|Merchandise||12 MB Change of PC||1 MB Change of PC||Pre-covid change|
|Soft plywood products||22.8||13.6||106.0|
|Hot rolled steel bars, sheets and sections||59.1||5.4||68.4|
|copper wire and cable||18.4||-0.1||35.6|
|Power wire and cable||43.7||-2.7||58.6|
|Plumbing fixtures and fittings||7.1||2.6||8.4|
|Sanitary ware in enameled iron and metal||8.4||0.2||11.6|
|Furnaces and heaters||19.2||3.6||20.3|
|Sheet metal products||38.6||1.9||38.1|
|Roofing and asphalt coating||19.7||4.9||23.7|
|Mineral wool insulation||23.0||5.2||28.8|
Prior to last year, individual commodity price indexes published by the BLS were almost never revised after release. However, in recent months, many construction material price indexes have been revised, some of them significant. These revisions will be discussed below.
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 13and day of the month. In January 2022, it would have been January 11.
In January, the price of softwood lumber again saw the largest monthly percentage increase in building material prices we track, rising 24.4%.
the timber market price dipped slightly in late January, but rebounded in February, closing at $1,291 on February 15. This represents an increase of approximately $80 since our last report. The prices of wood in the futures markets increased in parallel with the increase in the spot price. The July 2022 contract was trading at $1,148 in mid-January, up $60 in the last 4 weeks. The thinly traded September 2022 contract was at $1,021, down $4 over that time.
The price of flexible plywood products recorded the second largest increase in January of any commodity we track, both on a monthly basis and also relative to its pre-pandemic price level. The price index rose 13.6% in the month and 106% from its level around January 2020. The December price index for these products was also revised up by 1 .8%, so January’s price index actually rose 15.7% from the preliminary level. reported last month.
Prices for hardwood lumber and general millwork continue to rise steadily, although at a much slower pace than softwood lumber or plywood products.
The following chart below shows the recent history of several other building materials prices. These are the prices of relatively simple commodities that are heavily influenced by the prices of the materials that the commodities are made of.
The copper wire and electrical wire price indices fell in January despite downward revisions to the previous month’s indices. The December preliminary price index for copper wires and cables was revised down 0.9% this month while that of electrical wires and cables was revised down 0.8%.
Prices for the steel-based raw materials we track, such as hot-rolled steel bars, sheet metal products and nails, have all risen significantly from their pre-pandemic levels and have all posted significant price gains for the month.
MarketWatch Reports that the NYSE US steel index fell in late January but recovered in February. It closed on February 15 at $1,721, which is not much different from its price in mid-January when the PPI data was entered. Steel Futures are down slightly from the last time we reported them. The April 2022 contract is now priced at $981, up from $1,074 last month. The July 2022 contract is now at $955.
the copper price showed overnight volatility but closed Feb. 15 at $4.54, almost the same price it had on Jan. 12.
the aluminum price has been on the rise since mid-December. It closed Jan. 15 at $3,203, up nearly $300 from its Jan. 12 close.
December’s price index for asphalt roofing and siding was revised up 6.3%. This erased the fall in this index reported last month. The price of gypsum-based products has resumed its steady rise that began at the end of 2020.
The price variations of several of the finest building materials in our sample are shown in the final table below. The price index for electric lighting fixtures recorded the largest decline of those we track this month with a drop of 3.5%. The price index for furnaces and heating appliances rose 3.6% this month on top of a 1.5% upward revision to last month’s index. January’s rise in the enameled iron and metal sanitary ware price index appeared only nominal, but that’s partly because the December index was revised up 3.6%.
The full BLS report can be found here.