Moderate rise in building material prices in July
The Bureau of Labor Statistics (BLS) released its Producer Price Index (PPI) report for July 2022. It said prices for building materials rose 0.3% in the month, seasonally adjusted. The index was 14.8% higher than its level a year earlier.
Overall prices for processed goods for intermediate demand fell 2.3% during the month, driven by a 9% drop in prices for energy products. This index was 17.4% higher than its level a year ago.
For reference, the changes in these indexes can be compared to an 8.5% increase in the overall index. consumer price index (CPI-U) for the 12 months ending in July. July’s CPI-U was unchanged from June’s level. The housing portion of the CPI rose 5.7% 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 two columns on the right of the table show the percentage change in price of the product compared to the previous year (12 MB PC Change) and the percentage change in price from June 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 idea of the magnitude of recent price increases for materials, such as wood, whose prices have already risen sharply in the past 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||-34.5||-4.2||116.4|
|Hot rolled steel bars, sheets and sections||28.6||0.6||83.5|
|copper wire and cable||-6.1||-5.6||28.8|
|Power wire and cable||26.2||1.3||74.0|
|Plumbing fixtures and fittings||10.5||0.7||15.2|
|Sanitary ware in enameled iron and metal||17.6||0.2||21.4|
|Furnaces and heaters||16.1||-0.4||25.6|
|Sheet metal products||20.4||0.6||47.4|
|Roofing and asphalt coating||18.8||-0.4||34.1|
|Mineral wool insulation||21.6||3.3||39.2|
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 July 2022, it would have been July 12.
Wood product prices were mixed this month, with softwood lumber and general millwork prices rising slightly while plywood and hardwood product prices fell. The most watched prices, those for softwood lumber and plywood products, have reportedly fallen significantly over the past year, but much of this is because their prices were very high in July 2021. These building material prices fell considerably between July and August. last year, which will make next month’s year-over-year comparison less positive. Prices for wood products still saw some of the largest increases from pre-pandemic price levels.
Markets Insider reported that the timber market price reached a recent low of $479 on August 5. Since then, the price has increased. It jumped $50 on August 10 to close at $602. This price is still below the July 12 close of $645, so the price of wood may decline in next month’s PPI report. The prices of wood in the futures markets have fallen since last month, despite rising in recent days. The November 2022 futures contract closed at $603 on August 10, down $69 since our last report. The January 2023 contract closed at $636.
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, electrical wire and nails now trail only soft plywood products for the largest percentage price increases from their pre-pandemic levels.
The price of copper wire fell this month. Along with the overall 5.6% decline in the price index reported this month, the price indices for the previous two months were revised lower. On the net, the preliminary copper wire price level reported this month is 10.3% lower than June’s preliminary price level in last month’s PPI report.
Last month’s report indicated that the price of asphalt roofing and siding had the largest month-over-month percentage increase of any building material price we track. However, not only has the price of this product fallen in the current PPI report, but last month’s price index has been revised down by 1.6%.
MarketWatch Reports that, since our last report, the NYSE US Steel Index is trending up again. It closed on August 10 at $1,631, up $233 from its level a month ago. Steel Futures have also increased over the past month. The November 2022 contract closed on August 9 up 9% since July 12. The January 2023 contract is also up 9% from last month and is trading 13% above the August contract level.
The copper price has rebounded since our last report on this. It had closed at $3.29 per pound on July 12, but closed at $3.65 per pound on August 10.
The aluminum price is a far cry from the highs it reached shortly after Russia invaded Ukraine, but is up from the low reached in mid-July. It closed Aug. 10 at $2,490, up $130 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 prices of these construction materials have generally increased less than those of the products tracked in the first two graphs.
The three construction material prices that made the biggest jumps this month were for materials whose prices do not appear in our charts. These include construction hardware, mineral wool insulation and ready-mixed concrete. Despite this month’s rise in prices, prices for these building materials are not among the leaders in the strongest rise from their pre-pandemic levels.
The full BLS report can be found here.