Prices of Building Materials Decline

Prices received for four key building materials (prior to sales to consumers)—softwood lumber, OSB, gypsum products, and ready-mix concrete—all fell in October according to the latest Producer Price Index (PPI) release by the Bureau of Labor Statistics.

OSB prices declined 0.5% in October, ending a 7-month trend that had made the commodity the most expensive it had been in over three years. The small percentage decrease, while welcome, is paltry compared to the cumulative 25% price increase OSB had experienced since February.  Prices received for ready-mix concrete, gypsum products, and softwood lumber declined by 0.1%, 0.5%, and 1.2%, respectively.

2016-11-ppi-prices-chart

The U.S. dollar (USD) remains relatively strong against the Canadian dollar, and further currency appreciation appears on the horizon as Federal Reserve officials signal that they will raise the U.S. benchmark interest rate in December. A strengthening U.S. dollar makes Canadian softwood lumber cheaper to import, which may prove increasingly important as softwood lumber litigation picks up in an uncertain international trade environment.

Exchange Rate of U.S. Dollar to Canadian Dollar

2016_11_usd_cd_fx_rate-1

After rising 0.3% in September, the economy-wide PPI was unchanged in October. The flat reading was a result a 0.4% increase in the index for final demand goods being offset by a 0.3% decline in prices for final demand services. A 0.1% decline in the final demand prices for core goods (i.e. goods excluding food and energy) partly pared September’s 0.3% increase, and prices for core goods less trade services rose 1.6% over the 12 months ended in September, representing the largest 12-month increase since September 2014.

Most of the rise in prices for goods—the second straight increase—was due to a 2.5% increase in energy prices. For the second consecutive month, energy prices were buoyed by a significant jump in gasoline prices.  Prices increased 9.7% in October, nearly twice the September increase. The decline in prices for final demand services was led by a 0.3% decrease in prices of services less trade, transportation, and warehousing, more than offsetting the 0.2% September gain in the same category.

 



Tags: , , , , , , , , , ,