Prices paid for goods used in residential construction climbed 1.8% in September (not seasonally adjusted) according to the latest Producer Price Index (PPI) report released by the Bureau of Labor Statistics. The index for inputs to residential construction, goods less food and energy (i.e. the “core”)—a less volatile price measure—increased 2.2% over the month. The core index for building materials has increased 4.0% since declining 0.6% in April and is up 4.4% year-to-date (YTD).
A 28.6% increase in prices paid for softwood lumber (seasonally adjusted) led the overall index higher and is the fourth consecutive double-digit percentage increase, month-over-month. Over the last five months, the PPI for softwood lumber has nearly doubled (+90.9%). Sharply higher lumber prices have added nearly $16,000 to the price of an average new single-family home since mid-April.
The monthly increase is the largest in the history of both the seasonally adjusted and unadjusted data sets which date back to 1975 and 1947, respectively. The biggest monthly increase during the then-historic price run of 2018 was 5.4%, less than half the magnitude of the smallest increase since June 2020.
In addition to nominal price increases and tariffs on Canadian lumber, cross-border purchasers have been hurt by a weakening U.S. dollar (USD) since March. Although it has ameliorated in recent weeks, the value of the USD relative to the Canadian dollar remains 8.4% lower than it was in the spring.
Prices paid for gypsum products climbed 0.2% in September following 0.2% and 0.4% declines in July and August, respectively (seasonally adjusted). Although it has decreased 2.8% YTD, the price index for gypsum products has risen 0.5% over the past 12 months.
Prices paid for ready-mix concrete (RMC) rose 1.5% in September (seasonally adjusted), a monthly increase the magnitude of which is atypical of the commodity. The national PPI for RMC has increased by more than 1% just five of the 135 months since the end of the Great Recession. The average annual change in prices paid for RMC was 2.6% over the last decade.
The only region to experience a price decline in September was the South (-0.8%). Prices rose in the Northeast, Midwest, and West by 3.3%, 1.5%, and 4.4%, respectively (not seasonally adjusted).
Other changes in indexes relevant to home building and infrastructure are shown below.