Producer Prices in February – Building Materials Prices Continue to Outpace the Rest

The Bureau of Labor Statistics (BLS) released the Producer Price Indexes (PPI) for February. Energy prices, rising 3.0% based largely on gasoline prices, pushed the overall index up 0.7%. Food prices declined 0.5% while the core price index (i.e., excluding food and energy) was stable, rising 0.2% since last month.

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While overall producer prices have been relatively stable, the prices for certain building materials have risen rapidly as the housing recovery has gained momentum since the beginning of 2012. Overall producer prices are up less than 3% while softwood lumber, OSB and gypsum prices are 30%, 80% and 26% higher than at the start of 2012.

The rising prices of these building materials represent a significant challenge for home builders as they find themselves squeezed between rising input prices and a housing market where prices are only recently recovering from their steep declines.

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  1. Over the last several weeks I have been addressing how March sets up April, May and June in our lumber industry. Our conversation has created an understanding of why the first month of spring begins lethargically. March begins slowly as lumber dealers process winter buys that were bought to cover muted winter, and increasing March, demand.

    NOW WE TURN UP THE HEAT. Days will be getting longer and warmer for the next six months.

    Housing starts and demand for lumber in Q2 will be very strong in relation to supply and in relation to any of the last 12 months.

    Our expectations regarding Asian housing contraction and increased North American lumber availability will not be a factor in our Q2 U.S. lumber market, but let’s keep a Q3 vigil.

    In April we will see increased lumber mill sales. As credit and cash flow permits, lumber & OSB consumers will begin accumulating inventories. Each week, over the next two months, cash flow, and ability to buy lumber will increase, but lumber supply will not. Lumber consumers’ need, willingness and desire will likely push our lumber market to RECORD HIGH PRICES before Memorial Day.

    IF YOU HAVE A JOB SOLD FOR DELIVERY OVER THE NEXT TWO MONTHS, BUY IT…NOW.
    THIS IS NOT A MARKET TO GAMBLE ON THE SHORT SIDE.

    Happy Trading…ml
    Layman’s Lumber Guide

Trackbacks

  1. Building Materials Prices Continue to Outpace the Rest « WB SysTech
  2. Eye on the Economy: Growing Housing Demand Challenges Supply | Eye on Housing
  3. Maupin Development » Eye on the Economy: Growing Housing Demand Challenges Supply

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