Prices paid for goods used in residential construction ex-energy rose 2.4% in March (not seasonally adjusted) and have increased 9.8% over the past 12 months, according to the latest Producer Price Index (PPI) report released by the Bureau of Labor Statistics. Building materials (i.e., inputs to residential construction less food and energy) prices have declined just twice since December 2019.
The index for inputs to residential construction, including food and energy, also increased over the month (+3.2%) as energy prices climbed 5.9%.
Steel mill products prices increased by 17.6% in March, surpassing the previous record high set in 2018. Additionally, the month-over-month percentage increase set a record high for the second month in a row. Steel mill products price volatility is greater than it has been at any time since the Great Recession.
Over the past three months, prices have climbed 22.0%. Perhaps more concerning than rising prices is that the pace of increases has quickened each of the past eight months.
Prices paid for softwood lumber (seasonally adjusted) rose 5.3%, setting a new record high for the second consecutive month. Lumber prices have remained extremely volatile since the 88.5% increase between April and September 2020. Since falling 22.9% between September and November, the softwood lumber PPI has risen 42.6%.
In addition to nominal price movements and tariffs on Canadian lumber, cross-border purchasers are affected by the strength of the U.S. dollar relative to the Canadian dollar. Not only has the USD weakened 13.6% since March 2020, it has fallen 4.5% since lumber prices began rising again in November.
Prices paid for gypsum products increased 2.1% in March, more than offsetting the 1.3% decline seen in February. The PPI for all gypsum products has increased 6.3% over the past 12 months while the index for gypsum building materials (e.g., drywall) is up 6.6%.
Prices paid for ready-mix concrete (RMC) climbed 0.2% (seasonally adjusted), following a 0.3% increase in February. Unlike softwood lumber prices, those of RMC have stabilized in the first three months of 2021 after exhibiting above-average volatility in the second half of 2020.
Prices were flat in the Northeast and Midwest regions in March while price increases were recorded in the South (+0.1%) and West (1.6%).
Other changes in indexes relevant to home building and infrastructure are shown below.