Eye On Housing
For the third straight month, prices of softwood lumber, gypsum, ready-mix concrete, and OSB all increased, according to the latest Producer Price Index (PPI) release by the Bureau of Labor Statistics. Unlike March, when softwood lumber and OSB led price increases, gypsum topped the list in April with prices increasing 5.1%.
As expected, the price of softwood lumber increased again in April. The 3.0% increase pushed the softwood lumber price index to its highest level in over a decade. Prices have not been this high since September 2004—three years into the last lumber trade dispute between Canada and the United States. The price of softwood lumber has increased 10.4% during the first four months of 2017 and is 13.4% higher than one year prior.
These increases have been largely, if not completely, due to the ongoing softwood lumber trade dispute between the U.S. and Canada. Although upward pressure has abated in recent weeks, the Random Lengths Framing Lumber Composite Index (below) has still risen more than 20% since January.
Exchange rates will gain attention should the dollar substantially falter. A weaker dollar would exacerbate the price effect of tariffs by making Canadian lumber more expensive for U.S. buyers. While the dollar is not quite as strong as it was at the beginning of the last trade dispute in 2001, it is historically strong nevertheless.
OSB prices posted a 4.4% increase in April and have increased more than 25% since April 2016. The price index for OSB—10.4% higher than it stood in January—stands at its highest level since June 2013.
The 5.1% increase in prices paid for gypsum products (seasonally adjusted) represents the largest monthly increase since April 2016 and the second-largest increase since January 2013. Gypsum prices have risen 7% over the past year in contrast to the April, year-over-year increases of 2% in 2016 and 3% in 2015. Ready-mix concrete prices rose by 0.9% on a seasonally adjusted basis in April, the largest monthly increase since June 2014.
The economy-wide PPI advanced 0.5% in April. Nearly two-thirds of the increase is attributable to prices paid for services, which rose 0.4%. Prices for final demand goods also moved up 0.5%. Final demand prices for core goods (i.e. goods excluding food and energy) continued the upward trend that began in November 2016, climbing 0.3%. Prices for core goods less trade services climbed 0.7%.
Roughly 40% of the increase in prices paid for final demand goods was due to core goods, though final demand prices paid for food and energy rose 0.9% and 0.8%, respectively. Over a quarter of the April advance in the index for final demand services was due a 6.6% increase in prices paid for securities brokerage, dealing, investment advice, and related services.
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