Most Residential Building Material Prices Shift Up

Bureau of Labor Statistics reported a seasonally adjusted 0.3 percent decline in producer price index in October, driven by a 1.4 percent decrease in the prices for finished energy goods.
Courtesy of NAHB

An easing in energy prices aided a decrease in the producer price index for finished goods in October.

The index for finished goods has fluctuated in recent months, but has shown little change since May following the peak in oil prices. Overall, the PPI is up 5.9% relative to October 2010, which is largely a reflection of the strong growth during the first four months of this year.

Nearly two thirds of the October decline in the energy price index can be attributed to the decrease in the gasoline index, which fell 2.4 percent. Lower prices for residential natural gas (-3.3 percent) and home heating oil (-6 percent) also contributed to the decline.

The composite index of inputs into residential construction declined 0.4 percent in October, after being unchanged (NSA) in September, but it is up 5.9 percent year-over-year. This month-over-month decline was driven mainly by falling energy prices, with gasoline (-5 percent) and #2 diesel fuel (-2.2 percent) included in the index.

The price index for copper also fell sharply (-8 percent), but the index for most other building materials increased. While many materials experienced only a modest rise (between +0.1 percent and +0.6 percent), stronger price increases were observed in the indexes for gypsum (+3 percent), plywood (+3 percent) and asphalt roofing and siding (2.5 percent).

The rise in gypsum prices in October marks the beginning of a change in pricing strategy by gypsum producers. In late-September and early-October, most large gypsum producers announced that they were shifting to fixed pricing and would cease all job quotes immediately. Several producers also announced a price increase of 35 percent, effective January 1, 2012.

- Courtesy of NAHB