Prices of Most Building Materials Increase in November

Prices received for three key building materials (prior to sales to consumers)— OSB, gypsum products, and ready-mix concrete—all rose in November according to the latest Producer Price Index (PPI) release by the Bureau of Labor Statistics.  In contrast, softwood lumber prices continued a three-month downward trend, falling 1%.

Prices received for ready-mix concrete and gypsum products increased by 1.0% and 0.4%, respectively. After declining in October, OSB prices also increased, rising 1.5% to reach the highest level seen since June 2013. The commodity has become 26% more expensive since February of this year.

The U.S. dollar (USD) appreciated steeply against the Canadian dollar today when the Federal Reserve Federal Open Markets Committee announced that it would raise the benchmark interest rate target by 0.25 percentage points (for more on the rate hike, see NAHB’s Federal Open Markets Committee December Meeting–Step Two).  The 1.2% spike (shown below) occurred at 2:01pm today when the interest rate move was made public. A strengthening U.S. dollar makes Canadian softwood lumber cheaper to import, which will prove increasingly important as softwood lumber litigation picks up and the tariff environment becomes increasingly uncertain.

Canadian Dollar per One U.S. Dollar: 12/14/2016

The economy-wide PPI increased 0.4% in November. Over 80% of the increase resulted from a 0.5% jump in prices for services with prices for final demand goods rose by 0.2%. A 0.2% increase in the final demand prices for core goods (i.e. goods excluding food and energy) more than offset October’s 0.1% decline, and prices for core goods less trade services climbed 1.8% over the 12 months ended in November, representing the largest 12-month increase since August 2014.

Most of the rise in prices for goods—the third straight increase—was due to the increase in prices of core goods.   Energy prices reversed course after a 2.5% rise in October, falling 0.3%. In contrast to last month, energy prices were suppressed by a 2.9% decline in gasoline prices. The increase in prices for final demand services was led by margins for apparel, jewelry, footwear, and accessories retailing, which advanced 4.2%.



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