Construction materials prices reported flat

The February producer price index (PPI) report from the Bureau of Labor Statistics (BLS) stated that construction materials prices were unchanged in the month, seasonally adjusted. The index of components and materials for construction was 2.9 percent higher than its year-earlier level.

Overall prices for processed goods for intermediate demand fell by 0.4 percent in the month as the price index for fuels and lubricants fell 1.6 percent. The processed goods for intermediate demand index was 2.1 percent higher than its year-earlier level.

For reference, the changes in these indices compare with a 6.0 percent rise in the all-items consumer price index (CPI-U) for the 12 months ending in February. The seasonally adjusted February CPI-U was up 0.4 percent from January's level. The shelter portion of the CPI-U was up 0.8 percent for the month and was 8.1 percent higher than its year-ago level.

Yield Pro compiled the BLS reported changes for our standard list of construction materials prices. These are prices of materials which directly impact the cost of constructing an apartment building. The two right hand columns of the table provide the percent change in the price of the commodity from a year earlier (12 Mo PC Change) and the percent change in price from January 2022 (1 Mo PC Change). If no price data is available for a given commodity, the change is listed as N/A.

The pre-COVID column lists the change in the current construction materials prices relative to the average of prices from December 2019 through February 2020, before the pandemic impacted the economy. This may give a truer idea of the magnitude of the recent price increases for materials, such as lumber, whose prices were already rising sharply last year, than does the 12 Mo PC Change column.

The first chart, below, shows the price index history for wood products over the past 37 months. Note that the prices used by the BLS in compiling the indexes are collected on the Tuesday of the week containing the 13th day of the month. In February 2022 that would have been February 14. In March 2023, the data collection date will be March 14.

The volatile prices of wood products have been trending down lately with the prices of both softwood lumber and soft plywood products down significantly over the past year. However, the price rise of soft plywood products from its pre-pandemic level remains the second highest of the commodities that we track. While this price was reported to be up 0.3 percent for the month of February, this was largely due to January's price index being revised lower by 3.3 percent.

Markets Insider reported that the market price of lumber generally trended lower in February. It closed on February 14 at $403 but fell to $337 on March 14. Lumber prices in the futures markets also trended lower, if not smoothly. The March 2023 contract closed at $344 on March 14, down $59 since our last report, while the May 2023 contract closed at $417, down $9.

The next chart, below, shows the recent history of several other construction materials prices. These are relatively simple commodities whose prices are strongly driven by those of the materials of which they are comprised.

The price of power wire and cable resumed its rise in February. Its reported price rise of 3.8 percent for the month was aided by a downward revision of 1.1 percent to last month's price index. However, its price runup from its pre-pandemic level remains by far the highest of the commodities we track.

The price of copper wire has been moving higher since last October. Its reported 3.3 percent price rise for the month is on top of an upward revision of 1.6 percent to last month's price index. When compared to the preliminary price level reported for last month, its price increase is the highest of the commodities we track.

Looking at prices for underlying materials, MarketWatch reports that the NYSE American steel index has been trading around $2000 since late January. It closed on March 14 at $1890, down $111 or 5.5 percent, from its level of a month ago. However, steel futures have moved sharply higher since mid-February. The May 2023 contract for Midwest domestic hot-rolled coil steel closed on March 14 up 47 percent since February 14.

The price of copper closed at $4.03 per pound on March 14, down $0.05 since February 14. However, it had closed as high as $4.21 and as low as $3.95 per pound in that 4 week span.

The price of aluminum has recently also fallen from the highs it reached in January. It closed on March 14 at $2,350, down $67 from its close on February 14 and down $302 from its January high.

Price changes for several of the more finished goods from our sample are illustrated in the final chart, below.

The prices of these goods have been relatively stable for the past 6 months. The reported 2.0 percent rise in the price index for enameled iron and metal sanitary ware was due to a 2.0 percent downward revision to last month's price index.

The full current BLS report can be found here.