Construction materials prices up for the month

The March producer price index (PPI) report from the Bureau of Labor Statistics (BLS) stated that construction materials prices rose 0.5 percent for the month, seasonally adjusted. This is after a string of 4 months where the index had either fallen or only risen by at most 0.1 percent. The index of components and materials for construction was 1.4 percent higher than its year-earlier level.

Overall prices for processed goods for intermediate demand fell by 1.0 percent in the month as the price index for fuels and lubricants fell 5.1 percent. The processed goods for intermediate demand index was 1.0 percent lower than its year-earlier level.

For reference, the changes in these indices compare with a 5.0 percent rise in the all-items consumer price index (CPI-U) for the 12 months ending in March. The seasonally adjusted March CPI-U was up 0.1 percent from February's level. The shelter portion of the CPI-U was up 0.6 percent for the month and was 8.2 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 February (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.

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 March 2022 that would have been March 14. In the April 2023 report, the data collection date will be April 11.

The first chart, below, shows the price index history for wood products over the past 37 months.

Of the four categories of wood products that we track, only the soft plywood products category experienced price rises in March. When the upward revision to the prior month's price index is included, soft plywood products saw a price rise of 1.8 percent for the month.

The other three categories of wood products saw their price indexes fall for the month on top of small downward revisions to the price indexes for February. Softwood lumber, which was the commodity which led the 2020 price surge, is now only in the middle of the pack for post-pandemic price increases.

Markets Insider reported that the market price of lumber moved higher in March before declining somewhat in early April. It closed on March 14 at $337 but rose to $385 on April 11. Lumber prices in the futures markets trended lower, if not smoothly. The May 2023 contract closed at $390 on April 11, down $27 since our last report.

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 post-pandemic price rise leader, power wire and cable, took a break from its price climb this month with a decline of 0.3 percent. In fact, 5 of the 6 construction material indexes plotted in this chart fell for the month. Only the asphalt roofing and siding index eked out a gain, rising 0.1 precent.

The biggest surprise for the month is that the price index for nails was reported to fall by 6.2 percent for the month. This index had been reported to be nearly unchanged for 6 months in a row prior to this drop. Nails had by far the largest monthly change of any of the construction materials prices that we track.

Looking at prices for underlying materials, MarketWatch reports that the NYSE American steel index dropped below its trading range of around $2000, trading as low as $1,758 in mid-March. It rebounded recently, closing at $1908 on April 11, up $18, or 0.9 percent, from its level of a month ago. Meanwhile, steel futures have been trending lower since mid-March. The May 2023 contract for Midwest domestic hot-rolled coil steel closed on April 11 down 12 percent since March 14 while the August contract closed down 11 percent over that same time frame.

The price of copper closed at $4.02 per pound on April 11, down $0.01 since March 14. However, it had closed as high as $4.12 and as low as $3.84 per pound in that 4 week span.

The price of aluminum rose in late March only to fall in early April. It closed on April 11 at $2,302, down $48 from its close on March 14 and down 13 percent 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.

Enameled iron and metal sanitary ware was one of the last construction materials categories whose price index experienced a post-pandemic price rise, but it is now reported to have the fourth highest year-over-year rise among the construction materials prices that we track. However, this rise is primarily due to the reported jump in this index that occurred in April of last year.

The 2.6 percent increase in the enameled iron and metal sanitary ware price index for March was the highest of the construction materials that we track, but this rise was entirely due to the prior month's index being revised downward by the same amount. This is the second monthly report in a row where this has happened for this commodity.

The full current BLS report can be found here.