Building materials prices continued to climb in March, according to the latest Producer Price Index (PPI) release by the Bureau of Labor Statistics. Oriented strand board (OSB) led price increases, up 9.3% since February (not seasonally adjusted), while the indexes for ready-mix concrete (+3.3%), softwood lumber (+2.2%), structural steel (+2.0%), and gypsum products (+1.1%) also moved higher.
The 9.3% increase in OSB prices follows February’s 3.1% gain and is the largest monthly climb since October 2017 (+14.1%). After a three-month downward trend, OSB prices have risen 12.6% over the past two months.
The 9.3% increase is larger than recent Random Lengths data would suggest, but is consistent with last month’s post. That article noted that last month’s 9.5% increase in the Random Lengths OSB index “[would] likely be captured in [April’s] PPI release.” Due to methodology, OSB and softwood lumber data in the PPI tend to lag market conditions.
Ready-mix concrete (RMC) prices rose 3.3% over the month (seasonally adjusted), the largest percentage increase since January 2006. Prices had increased at a remarkably stable pace until last month, as shown below.
Since the end of the Great Recession, the RMC price index (SA) has increased 0.2% each month, on average. In fact, over the last 15 years, only twice has the monthly change in the index been greater than +3%. During that period, the monthly change exceeded 2% and 1% in just four and 18 months, respectively.
Increases for prices paid for softwood lumber (not seasonally adjusted) moderated in March after climbing 5.6% in February. The softwood lumber price index has increased each month of 2018 by an average of 2.9%, compared to 2.3% over the same months last year.
Prices paid for hot-rolled structural steel increased 2.0% in March (NSA) and 7.2% in the first quarter of 2018, marking the largest quarterly increase since Q1 2011. Although increases have been steep of late, the price level remains below its most recent peak in 2015.
The economy-wide PPI increased 0.3% in March, with prices paid for both goods as well as services climbing 0.3%. Prices paid for core goods (i.e. goods excluding food and energy) also rose 0.3%, while the index for final demand less food, energy, and trade services climbed 0.4% for the third consecutive month.
Two major factors in the advance in prices paid for services were a 0.6% increase in the index for transportation, and warehousing services, and a 0.4% increase in the price paid for outpatient care services. The indexes for hospital inpatient care, machinery and equipment wholesaling, cable subscriber services, and airline passenger services also moved higher. In contrast, margins for automotive fuels retailing fell 10.4%.
Most of the increase in the prices paid for goods is attributable to food prices, which advanced 2.2%. In fact, over half of the overall increase in the prices paid for goods can be traced to a 31.5% spike in prices for fresh and dry vegetables (which fell by 27.1% in February). Prices for gasoline fell 3.7%, the second straight monthly decrease.