Producer Prices in September – Stable Core, Volatile Energy, Some Building Materials Inflation

The Bureau of Labor Statistics (BLS) released the Producer Price Indexes (PPI) for September on Friday. The PPI for finished goods increased 1.1% from August on a seasonally adjusted basis, driven mainly by a 4.7% increase in prices for finished energy goods. Prices for finished food goods rose at a 0.2% annual rate while the core index (i.e., finished goods less food and energy) was unchanged. Swings in the energy index, led mainly by gasoline prices, have been the key factor moving producer prices since mid-2010 as growth in the core index has been relatively stable.

Among inputs for home building, PPIs for gypsum and wood products showed sustained increases since the beginning of the year. Prices for gypsum declined slightly in September but are still 14.6% higher than in December of last year. Prices for softwood lumber and OSB have increased 12.4% and 50.2%, respectively, over the same period. While these increases leave these materials prices below their housing boom peaks, they are elevated relative to most of the post-boom experience.

In the case of OSB, there has been some indication in the trade press that the recent price increases are related to capacity constraints. Productive capacity was reduced in the wake of the housing bust, expanded in mid-2010 as the homebuyer tax credit stimulated demand and prices spiked, but reduced again when that demand faded with the expiration of the credit. Reports are that as producers judge the improvements seen in housing demand this year sustainable, capacity will be increased which should lead to easing in prices.

 



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  1. Building materials seem to inflated from last two years as the number of constructions is increasing day by day. Producer Price Indexes is slowly rising day by day slowly leading to the construction costs higher.

  2. The Concrete Foundations Association (CFA) represents concrete foundation contractors and suppliers dedicated to the advancement of their industry. It develops marketing and technical publications, construction codes and standards, and safety recommendations. The association also provides educational and networking opportunities for CFA members.
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