Gypsum Prices Continue to Climb

The prices of gypsum, softwood lumber, and ready-mix concrete increased by 1.4%, 0.6%, and 0.3%, respectively, in July according to the latest Producer Price Index (PPI) release by the Bureau of Labor Statistics. In contrast, the price paid for OSB fell 3.8%, its largest monthly decline since February 2016.

Gypsum prices rose 1.4% in July following a 1.3% increase in June.  The final demand price index for gypsum products has increased 7.5% in 2017 and 13.7% since January 2016.

The OSB price index fell for just the second time in 2017.  Prices also declined in June, but by just 0.4%.

The drop in the index—which runs counter to buyers’ experiences—is due to the fact that it includes waferboard, a reconstituted wood product in which the layers of flakes are not oriented.  According to Random Lengths data, the price of OSB actually increased by 8.1% in July.

The price of softwood lumber increased by just 0.6% in July which, like the OSB price index, runs contrary to builder’s experience. Though the PPI increase was relatively small, the direction is consistent with our assertion last month that the softwood lumber index would revert to the upward trend during most of 2017.  The magnitude of the increase is inconsistent with the 7.8% jump in the Random Lengths Framing Lumber Composite Price (FLCP) over the month of July (below).  The disparities between the two measures are largely due to technical reasons outlined in last month’s PPI post.

Increasing by 0.3%, the change in prices paid for ready-mix concrete (seasonally adjusted) was again in line with its average since 2000. Prices increased nearly three-quarters of the months over that period by an average of 0.3%.

The economy-wide PPI declined 0.1% in July after a 0.1% increase in June. Over 80% of the decrease was driven by a 0.2% decline in prices paid for services. Like the full PPI index, prices for final demand goods also fell 0.1%, reversing the 0.1% increase seen in June. Final demand prices for core goods (i.e. goods excluding food and energy) decreased 0.1% after eight consecutive monthly increases. Prices for final demand core goods less trade services was unchanged.

A major factor in the decrease in prices for goods was a 1.4% decline in prices paid for gasoline, marking the second consecutive month in which gasoline prices fell more than 1.0%. Conversely, the price of grains moved significantly higher, up 17.1% over the month. As noted above, the index for final demand services edged down 0.1% after increasing over each of the four prior months. The decline was led by a 5.8% drop in the margins for the wholesaling of chemicals and allied products.

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