Energy Costs Continue to Push Residential Building Materials Prices Up

Higher energy prices continued to be the primary force behind increases in building materials prices.

The Bureau of Labor Statistics (BLS) released November Producer Price Index (PPI) numbers today. The PPI for finished goods rose 0.8% for the month (seasonally adjusted), up from the 0.4% increase October and September, and was up 3.5% on a year-over-year basis. 

The November increase was largely driven by higher energy prices, together with higher food prices. The PPI for energy rose 2.1%, its fourth consecutive monthly increase, though down from October’s 3.7% increase. The foods PPI rose 1.0%, its fourth increase in five months. Excluding food and energy, the index rose a modest 0.3% after falling 0.6% in October, and on a year-over-year basis was up a relatively moderate 1.2%.

Prices for “Materials and components for construction” were up 0.2% on a seasonally adjusted basis in November after a 0.1% rise in October and falling the four months previous to that. On a year-over-year basis the index was up 2.2%. However, residential building material prices rose 0.4% (not seasonally adjusted), the same increase as in October. On a year-over-year basis, they were up 3.9%, but were still down 0.5% from their September 2008 record high.

Higher energy prices continued to be the prime mover behind the increase in residential construction materials cost—for example #2 diesel fuel was up 4.8% for the month (NSA) and 18.5% from a year earlier, although some other materials prices, such as softwood lumber (up 2.2% for the month and 5.5% from a year earlier) contributed as well. Another major contributor was copper and copper products prices, which rose 6.1%, their fifth consecutive monthly increase, and were up 25.7% from November 2009. There was some offset from plywood prices, down 2.6% for the month (though still up 2.2% from a year earlier), ceramic floor and wall tile prices, down 1.7% and off 1.0% from a year earlier, and brick prices, down 1.7% and 0.4% lower than a year earlier.

With residential construction struggling to advance, commercial construction bouncing along a bottom, and worldwide economic growth advancing at a moderate pace, there would appear to be little room for upward movement in building materials prices. However, higher energy prices continue to put pressure on builders’ and suppliers’ costs.



0 replies

  1. Not much has changed over the last year.The houssing market is still at a bottom as is the commercial sector, and material prices are creeping up slowly. we really need to get the housing market going or it may stall us for 2012.

  2. This is very true. My business is building houses.Since the 2007 credit crunch materials have slowly crept up to probably their highest level since 1988, and house prices have dropped which means that we have to build them for less. Bring back 2006 that’s all I acn say. The graphs above speak for themselves.

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