November 21, 2013
The Bureau of Labor Statistics (BLS) released the Producer Price Indexes (PPI) for October. Producer prices for finished goods declined by 0.2% in October following a 0.1% decline in September. Increases in core prices (excluding food and energy) of 0.2% and food prices of 0.8% were offset by a 1.5% decline in energy prices, pushing the overall index down.
Wood products prices edged up as the monthly PPIs are beginning to reflect increases in weekly measures. Gypsum prices declined modestly from a recent May peak but the outlook is for higher prices in 2014 given announced planned increases for 2014 from National Gypsum.
September 13, 2013
The Bureau of Labor Statistics (BLS) released the Producer Price Indexes (PPI) for August. Producer prices for finished goods rose 0.3% in August driven by increases in food (0.6%) and energy (0.8%) prices. Excluding food and energy, the core index was flat.
The PPI for softwood lumber rose 2.6% from July to August after declining 2.3% from June to July. Strong demand from China helped the rebound. Offshore markets have gained favor as recent price declines have triggered the return of the export tax on Canadian shipments to the US.
OSB prices declined 9.5% in August, bringing them to their lowest level since the run-up that began in early 2012, but leaving them still 34.6% higher than that low point.
Gypsum prices declined slightly in July and August, a two month decline of 1.8%, but the prospect of price relief was short-lived. Prices are currently at 92.6% of their peak housing boom levels and at least one major producer, National Gypsum, has announced a 20% price hike effective with 2014 shipments. This price increase is eerily similar to the hikes in early 2012 and 2013.
August 14, 2013
The Bureau of Labor Statistics (BLS) released the Producer Price Indexes (PPI) for July. Producer prices for finished goods were flat in July after rising 0.8% in June and 0.5% in May. Excluding food and energy, the core index continued its recent stability rising 0.1%. A 0.2% monthly decline in energy prices and flat food prices held the headline index flat despite the 0.1% increase in core prices.
PPIs for softwood lumber and OSB continued the descent that began earlier this year. Softwood lumber prices declined 2.3% from June to July, extending the decline from the recent April peak to 16.6%. However, softwood lumber prices are still 9.9% above prices from one year ago before the sharp run-up in late 2012 and early 2013.
OSB prices declined 12.2% in July, extending the decline from the March peak to 28.4%. OSB prices remain 48.8% above prices prior to the housing recovery that began in 2012.
Weekly indicators show wood prices rebounding somewhat in recent weeks, but the sharp declines remain largely intact. These declines are based on significant increases in productive capacity in the lumber and OSB industries which are likely to be added to rather than subtracted from as the housing recovery continues.
The PPI for gypsum dropped slightly in June and July. There have been some plant re-openings and reconfigurations in the industry but it remains to be seen whether recent declines are the beginning of a normalization of gypsum prices. Gypsum prices remain 37.3% above housing bust lows and 98.2% of housing boom peaks.
July 18, 2013
After a period of significant increases, the growth in the prices of building materials has slowed according to June Producer Price data from the Bureau of Labor Statistics (BLS).
Year-over-year growth in gypsum prices slowed by 3.8 percentage points to 15.6%. Annual softwood lumber price growth decelerated by 8.7 percentage points to 8.0%. And Oriented Strand Board (OSB) prices grew by 37.0% year-over-year in June, still high, but 17.8 percentage points less than the year-over-year growth recorded in May.
The slowing of the growth of building material prices is good news for builders and bears watching for the rest of 2013.
For the economy as a whole, producer prices for finished goods rose by 0.8% on a seasonally adjusted month-over-month basis in June, the second consecutive month of growth.
June 14, 2013
The Bureau of Labor Statistics (BLS) released the Producer Price Indexes (PPI) for May. A 1.3% increase in energy prices and a 0.6% increase in food prices helped to push the overall producer price index for finished goods up 0.5%. Excluding food and energy, the core index rose 0.1%.
As expected (Producer Prices in April – Builders May Get Relief on Wood Products Prices), the PPIs for framing lumber and OSB declined from April to May, -7.7% and -10.9% respectively. Increased production in both the US and Canada combined with favorable trade developments, lower exports to China and higher imports from other markets contributed to the declines. Early indications are that the June numbers will add to May’s declines.
While welcome relief, these price declines still leave wood product prices at elevated levels. The 67% rise in framing lumber prices from their housing bust lows has been reduced to 54% but prices are still at 89% of their housing boom peaks. The 151% rise in OSB prices has been reduced to 124% but prices are still at 62% of their peaks.
Increased production from the announced plant openings and re-startings is beginning to have an effect. Continued improvement in the housing market should justify the confidence for and the profitability of further additions to capacity providing additional relief.
May 15, 2013
The Bureau of Labor Statistics (BLS) released the Producer Price Indexes (PPI) for April. Overall, producer prices declined for a second month based on continuing declines in energy prices, but the sharp price increases for the building materials framing lumber and OSB may be nearing an end.
The PPI for finished goods declined 0.7% in April from March (seasonally adjusted) driven by a 2.5% decline in energy prices. Core prices (excluding food and energy) continued their modest pace, rising 0.1% in April. Declining food prices also contributed to the decline in overall producer prices.
The monthly PPIs for framing lumber and OSB increased from March to April, 3.2% and 6.5% respectively, but weekly price data from Random Lengths indicate that turning points during April may be the beginning of a reversal of the steep increases that have accompanied the housing market recovery. If sustained these declines should appear in the June release of the May data.
Indexing both the PPI and the Random Lengths framing lumber price to January 1995 shows that they move together closely, reflecting the same price dynamics, with the weekly data from Random Lengths showing a larger amplitude in the changes. Based on monthly prices the PPI indicates a 67% increase from the 2009 trough to April; the weekly data show a trough to April increase of 124% in lumber prices.
Price increases for OSB are even more dramatic. According to the PPI data OSB prices have increased 151% since bottoming out in the housing bust; the weekly Random Lengths data show a 206% increase.
A break in prices would be a welcome relief for builders. With house prices less than 10% above their housing bust lows, the impact of these rising input costs has presented a significant challenge for builders during the recovery.
March 14, 2013
The Bureau of Labor Statistics (BLS) released the Producer Price Indexes (PPI) for February. Energy prices, rising 3.0% based largely on gasoline prices, pushed the overall index up 0.7%. Food prices declined 0.5% while the core price index (i.e., excluding food and energy) was stable, rising 0.2% since last month.
While overall producer prices have been relatively stable, the prices for certain building materials have risen rapidly as the housing recovery has gained momentum since the beginning of 2012. Overall producer prices are up less than 3% while softwood lumber, OSB and gypsum prices are 30%, 80% and 26% higher than at the start of 2012.
The rising prices of these building materials represent a significant challenge for home builders as they find themselves squeezed between rising input prices and a housing market where prices are only recently recovering from their steep declines.
December 13, 2012
The Bureau of Labor Statistics (BLS) released the Producer Price Indexes (PPI) for November. Once again energy prices are the main driver. The PPI for finished goods declined 0.8%, led by a 4.6% decline in the energy index. Core producer prices (i.e., excluding food and energy) rose 0.1%. Historically, core prices have been relatively stable, averaging monthly increases of 0.2%, while energy prices have been the main source of volatility.
In comparison to the relative calm of overall producer prices, prices for the inputs for home building have seen significant increases so far this year. In November gypsum and softwood lumber added to their gains in 2012, with prices 14% and 13% higher, respectively, than at the start of the year. Prices for OSB retreated slightly but remain 50% above last December’s level.
November 16, 2012
The Bureau of Labor Statistics (BLS) has released the Producer Price Indexes (PPI) for October. Producer prices continued the recent pattern of following energy prices. The PPI for finished goods declined by 0.2% in October from September while the index for energy goods declined by 0.5%. The core index which excludes food and energy declined by 0.2%.
Turning to the inputs for home building, prices for gypsum declined slightly in October but are 13.8% higher than at the start of the year. Prices for softwood lumber have been volatile in recent months, declining in October but averaging roughly 10% above last year’s levels. Prices for OSB continued their climb and now stand 52.1% above levels at the beginning of the year. Reports of another round of increases in gypsum prices in 2013 as well as continued strength in OSB prices could pose challenges for builders in 2013.
October 16, 2012
The Bureau of Labor Statistics (BLS) released the Producer Price Indexes (PPI) for September on Friday. The PPI for finished goods increased 1.1% from August on a seasonally adjusted basis, driven mainly by a 4.7% increase in prices for finished energy goods. Prices for finished food goods rose at a 0.2% annual rate while the core index (i.e., finished goods less food and energy) was unchanged. Swings in the energy index, led mainly by gasoline prices, have been the key factor moving producer prices since mid-2010 as growth in the core index has been relatively stable.
Among inputs for home building, PPIs for gypsum and wood products showed sustained increases since the beginning of the year. Prices for gypsum declined slightly in September but are still 14.6% higher than in December of last year. Prices for softwood lumber and OSB have increased 12.4% and 50.2%, respectively, over the same period. While these increases leave these materials prices below their housing boom peaks, they are elevated relative to most of the post-boom experience.
In the case of OSB, there has been some indication in the trade press that the recent price increases are related to capacity constraints. Productive capacity was reduced in the wake of the housing bust, expanded in mid-2010 as the homebuyer tax credit stimulated demand and prices spiked, but reduced again when that demand faded with the expiration of the credit. Reports are that as producers judge the improvements seen in housing demand this year sustainable, capacity will be increased which should lead to easing in prices.