The Producer Price Index (PPI) – a broad measure of the prices received by domestic producers of goods and services – increased in March, according to data from the Bureau of Labor Statistics.
The overall PPI increased 0.46% on a seasonally adjusted basis for the month of March, higher than analyst expectations. The PPI for goods was flat, with the increase in the headline PPI due to a month-over-month 0.65% for the PPI for services. On a non-seasonal adjusted basis, producer prices have increased 1.37% over the last 12 months, which while currently tame may suggest higher prices ahead.
Among home building materials, gypsum prices were down 0.9% for the month of March, after significant increases in February (4.1%) and January (7.4%). Softwood lumber products increased 1.7% in March, while OSB prices were effectively flat.
On a year-over-year basis, gypsum prices are up 9.5%, while softwood lumber prices are down slightly from a price peak set at the beginning of 2013. OSB prices are down nearly 40% from a significant run-up in price that began in 2012 but subsided at the end of 2013.
One conclusion that can be reached from recent years’ data is that the prices of major building materials tend toward volatility as home building expands. Rising and unpredictable building material prices represent yet another potential headwind along the overall path of recovery for the residential construction sector.