Producer Prices in May – Wood Products Prices Begin Their Descent

The Bureau of Labor Statistics (BLS) released the Producer Price Indexes (PPI) for May. A 1.3% increase in energy prices and a 0.6% increase in food prices helped to push the overall producer price index for finished goods up 0.5%. Excluding food and energy, the core index rose 0.1%.

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As expected (Producer Prices in April – Builders May Get Relief on Wood Products Prices), the PPIs for framing lumber and OSB declined from April to May, -7.7% and -10.9% respectively. Increased production in both the US and Canada combined with favorable trade developments, lower exports to China and higher imports from other markets contributed to the declines. Early indications are that the June numbers will add to May’s declines.

While welcome relief, these price declines still leave wood product prices at elevated levels. The 67% rise in framing lumber prices from their housing bust lows has been reduced to 54% but prices are still at 89% of their housing boom peaks. The 151% rise in OSB prices has been reduced to 124% but prices are still at 62% of their peaks.

Increased production from the announced plant openings and re-startings is beginning to have an effect. Continued improvement in the housing market should justify the confidence for and the profitability of further additions to capacity providing additional relief.

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