Producer Prices in August – ‘Tis the Season …

The Bureau of Labor Statistics (BLS) released the Producer Price Indexes (PPI) for August. Inflation in prices received by producers (prior to sales to consumers) were unchanged in August following a 0.2% increase in July. Separately, a 0.4% increase in prices for services was offset by a 0.6% decline in prices for goods, driven mainly by falling gas prices. Excluding food and energy, goods prices were -0.2% lower in August.

Among building materials, softwood lumber prices partially reversed the 2.4% increase in July, declining 2.2% in August. Prices have hovered in this range since early 2014. Similarly, OSB price dropped 0.8% after a 1.0% increase in July. Overall, soft overseas demand has kept domestic supply at home placing downward pressure on prices.

Gypsum prices dropped another 0.9% in August, bringing the decline from a February peak to 6.5%. Gypsum prices are now slightly below the housing boom peak (although single family housing starts are just above one half of a healthier/lower pre-boom pace). But it’s approaching the end of the year and a recent tradition is entering its fifth year. Major producers of drywall and ceiling tiles (made of …) are announcing an array of price increases scattered through the second half of this year and 2016.

National Gypsum, USG, Armstrong, American Gypsum and CertainTeed/Saint-Gobain have all announced price increases, ranging from 5% to 10% now and another 10% next August, for wallboard and/or ceiling tiles, some effective as early as August 2015 and running through 2016.

It looks like recent gypsum price declines will be short lived.

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