Building materials price growth slowed in 2022

The producer price index (PPI) for inputs to residential construction less energy (i.e. building materials) rose 8.3% in 2022 (not seasonally adjusted) according to the latest PPI report—less than one-half the increase seen in 2021.

On a monthly basis, building materials prices declined 0.3% in December—the fourth consecutive monthly decrease. After increasing an average of 1.8% per month the first five months of 2022, the index averaged a monthly 0.1% decline from June through December.

Price growth of goods inputs to residential construction, including energy, declined even more sharply over the year due to a historic increase in fuel prices in 2021. Prices increased 8.2% in 2022 after surging 20.8% the prior year.

Softwood Lumber

The PPI for softwood lumber (seasonally adjusted) fell 6.9% in December and 26.1% over the course of 2022. Since increasing the first three months of the year, the softwood lumber index has fallen 45.8%.

Steel Mill Products

Steel mill products prices decreased 2.7% in December, the sixth consecutive decline. After soaring 128% in 2021, prices dropped 28.7% in 2022—25.0% since May.

Gypsum Building Materials

The PPI for gypsum building materials declined 0.2% in December but increased 17.6% over the course of 2022. Although the 2022 price increase was more than three times the 25-year average, it was substantially lower than the 23% increase seen in 2021.

Ready-Mix Concrete

The trend of ready-mix concrete (RMC) prices continued its historic pace as the index increased 1.6% in December. The PPI for RMC increased 13.6% in 2022, twice the 2021 increase and nearly seven times the historical average.

The monthly increase in the national data was broad-based geographically. Prices rose in all four regions—up 0.5% in the West, 1.1% in the Northeast, 1.6% in the South, and 2.1% in the Midwest. The price of RMC increased the most in the West region in 2022, up 18.8%, but each region experienced double-digit percentage increases over the year.

Services

The price index of services inputs to residential construction was unchanged in December after decreases in October and November. Prices rose 5.6% in 2022 after climbing 10.8% in 2021. In contrast to building materials, the index for services inputs increased substantially in 2020 as well (+10.0%). The 2020 increase was almost entirely driven by a large increase in building materials retailers’ gross margins.

Transportation of Freight

The price of truck and rail transportation of freight decreased 1.7% and 0.1%, respectively, in December. The index for deep sea (i.e., ocean) transportation of freight climbed 0.6%. Of the three modes of shipping, trucking prices showed the largest slowdown relative to 2021 as the growth rate fell from 17.9% to 8.2%. n