Residential Building Materials Prices Up

Largely propelled by higher energy prices, the Producer Price Index for finished goods, which has been rising since June, rose 1.1 percent from November on a seasonally adjusted basis, the largest increase since January 2010's 1.3 percent rise. On a year-over-year basis, the index was up 4 percent.

Once again, higher energy prices were the primary force behind increases in producer prices and building materials prices. Producer Price Index for energy rose 3.7 percent, its third consecutive monthly increase.

Excluding energy, the PPI for finished goods rose 0.5 percent from November, and 1.8 percent from December 2009. Excluding food and energy, the PPI rose 0.2 percent, and on a year-over-year basis was up a relatively modest 1.3 percent.

Prices for materials and components for construction rose 0.5 percent in December and were up 2.5 percent from a year earlier. However, residential building material prices have generally been rising faster than the materials and components for construction category. On a year-over-year basis, residential building material prices were up 4.5 percent in December. This makes it even tougher for construction and landscape industries to make a profit.

As with the overall PPI, most of the residential construction materials cost increase was driven by energy prices-for example #2 diesel fuel was up 2.3 percent for the month and 27.6 percent from a year earlier. Meanwhile, ever volatile copper and copper products prices slowed their rise to 1.4 percent, their sixth consecutive monthly increase. That still left prices up 20.8 percent from a year earlier.

Cement prices fell 0.1 percent and were down 5.1 percent from a year earlier. However, concrete products prices were up a bit for the month (0.2 percent) and were down only 0.2 percent from a year earlier. At the same time, ready-mixed concrete prices rose 0.2 percent in December and were down 1 percent from December 2009.

Residential construction advances at a snail's pace. Commercial construction struggles. Worldwide economic growth advances slowly. There appears to be little room for upward movements in building materials prices. However, higher energy prices continue to put pressure on builders' and suppliers' costs.

- Courtesy of NAHB