Producer Prices in January – Watch Gypsum

The Bureau of Labor Statistics (BLS) released the Producer Price Indexes (PPI) for January on Thursday. The index for finished goods rose 0.1 percent in January from December, balancing a 0.4 percent increase in the core index and declines in the food (-0.3 percent) and energy (-0.5 percent) indexes, keeping the overall index in line with its relatively flat trajectory of 2011.

The PPI for residential construction moved up a modest 0.6 percent in January with help from soft lumber prices (0.2% increase), but in spite of large increases in cement (2.8% increase) and gypsum (5.9% increase). As we have noted previously

( http://eyeonhousing.wordpress.com/2011/11/03/sharp-rise-in-gypsum-prices-likely-in-new-year/ ),

in late 2011 gypsum producers informed customers of planned price increases for 2012. Some NAHB members have confirmed the higher prices have taken effect, and the PPI provides additional evidence.

It is possible that the pattern of 2010 and 2011 will be repeated, with increases early in the year reversed over subsequent months, but this is an issue we will continue to watch closely.

 



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