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Latest PPI Results Show Construction Material Cost Increases Still Alarming

Alex Carrick
Latest PPI Results Show Construction Material Cost Increases Still Alarming

The most accessible single-source resource on construction material price movements is the Producer Price Index (PPI) data set from the Bureau of Labor Statistics (BLS). The PPI series monitors prices charged by producers as they exit through factory gates.

Latest PPI Results Show Construction Material Cost Increases Still Alarming Text Graphic

One drawback of a government statistical series, however, is that it will inevitably lag what is occurring in the real world, due to a time delay in collecting and tabulating results. For example, the latest PPI figures are for May. Therefore, they don’t factor in some of the decreases in final demand (e.g., some possible moderation in housing start activity) and increases in supply (e.g., more sawmill production of lumber) that may, according to ‘word of mouth’, be taking place.

Nevertheless, the PPI numbers are the best that’s available and the remainder of this article showcases them in tables and charts.

For 15 of the most important building materials or construction-related inputs, Table 1 highlights year-over-year and latest-three-months price changes.

More than doubling in price over the past year have been softwood lumber, +154.3%; particle board and OSB, +121.5%; regular gasoline, +151.9%; and diesel fuel, +199.2%.

With cost lifts lying between +50% and +99% are plywood, +98.4%; iron and steel scrap +76.6%; and asphalt, +62.3%.

Asphalt also has the distinction, however, of being one of only two items that experienced a price drop month to month in May, -13.8%. Coal, as a base material going into steel production, was the other, -0.3% m/m.      

‘Rocket Launch’ Cost Take-Offs

Below Table 1 are seven cluster charts of four graphs each. These almost double the number of building materials and construction-related inputs being studied to 28. The 28 graphs in the seven cluster charts show the histories of the PPI numbers from the turn of the century (January 2000) to the present.

Many of the series (e.g., in the cement/concrete field and in equipment) trend higher gradually and steadily, establishing new peaks along the way. Some others (e.g., among forestry products) take far more varied paths, with wide amplitudes up and down.

Among the material inputs with significant market swings in their histories, besides forestry and steel-related products, notice from Cluster Chart 4 the recent steep slopes for aluminum mill shapes (+28.6% y/y) and copper wire and cable (+38.8%).

Finally, it bears stating that from Cluster Chart 1, the ‘rocket-launch’ take-offs in forestry product prices since mid-2020 have been in a league of their own.

Table 1: U.S. Construction Material Cost Changes
From Producer Price Index (PPI) Series – May 2021
U.S. Construction Material Cost Changes
Data source: Bureau of Labor Statistics (BLS).
Charts: ConstructConnect.
Cluster Chart 1 – Forestry Products:
U.S. Construction Material Costs (1) – From Producer Price Index (PPI) Series
U.S. Construction Material Costs (1) - From Producer Price Index (PPI) Series
The last data points are for May, 2021.
Data source: U.S. Bureau of Labor Statistics (BLS), Producer Price Index (PPI) series, not seasonally adjusted (NSA).
Charts: ConstructConnect.
Cluster Chart 2 – Steel Products:
U.S. Construction Material Costs (2) – From Producer Price Index (PPI) Series
U.S. Construction Material Costs (2) - From Producer Price Index (PPI) Series
The last data points are for May, 2021.
Data source: U.S. Bureau of Labor Statistics (BLS), Producer Price Index (PPI) series, not seasonally adjusted (NSA).
Charts: ConstructConnect.
Cluster Chart 3 – Cement, Concrete and Brick:
U.S. Construction Material Costs (3) – From Producer Price Index (PPI) Series
U.S. Construction Material Costs (3) - From Producer Price Index (PPI) Series
The last data points are for May, 2021.
Data source: U.S. Bureau of Labor Statistics (BLS), Producer Price Index (PPI) series, not seasonally adjusted (NSA).
Charts: ConstructConnect.
Cluster Chart 4 – Base Materials:
U.S. Construction Material Costs (4) – From Producer Price Index (PPI) Series
U.S. Construction Material Costs (4) - From Producer Price Index (PPI) Series
The last data points are for May, 2021.
Data source: U.S. Bureau of Labor Statistics (BLS), Producer Price Index (PPI) series, not seasonally adjusted (NSA).
Charts: ConstructConnect.
Cluster Chart 5 – Energy-related Products:
U.S. Construction Material Costs (5) – From Producer Price Index (PPI) Series
U.S. Construction Material Costs (5) - From Producer Price Index (PPI) Series
The last data points are for May, 2021.
Data source: U.S. Bureau of Labor Statistics (BLS), Producer Price Index (PPI) series, not seasonally adjusted (NSA).
Charts: ConstructConnect.
Cluster Chart 6 – Accessories and Arterial:
U.S. Construction Material Costs (6) – From Producer Price Index (PPI) Series
U.S. Construction Material Costs (5) - From Producer Price Index (PPI) Series
The last data points are for May, 2021.
Data source: U.S. Bureau of Labor Statistics (BLS), Producer Price Index (PPI) series, not seasonally adjusted (NSA).
Charts: ConstructConnect.
Cluster Chart 7 – Equipment and Machinery:
U.S. Construction Material Costs (7) – From Producer Price Index (PPI) Series
U.S. Construction Material Costs (5) - From Producer Price Index (PPI) Series
The last data points are for May, 2021.
Data source: U.S. Bureau of Labor Statistics (BLS), Producer Price Index (PPI) series, not seasonally adjusted (NSA).
Charts: ConstructConnect.
Table 2: U.S. Producer Price Index (PPI) Results
% Change in the May 2021 Index from:
  3 Years   1 Year    6 months   3 months   1 month 
  Ago   Ago   Ago   Ago   Ago
                   
Final Demand/Service/Commodity/Energy/Input:                  
Final Demand Construction 11.0%   2.8%   2.6%   2.1%   0.6%
   New warehouse building construction 10.4%   3.2%   3.2%   3.2%   0.8%
   New school building construction 10.8%   1.3%   1.4%   1.0%   0.1%
   New office building construction 12.4%   4.4%   4.1%   3.0%   1.0%
   New industrial building construction 11.9%   1.7%   1.4%   0.9%   0.1%
   New health care building construction 11.2%   3.1%   3.3%   3.5%   0.7%
Architectural & engineering services 5.5%   3.1%   2.1%   0.5%   0.3%
Construction machinery & equipment 10.9%   2.8%   2.7%   1.5%   1.3%
Asphalt 7.8%   62.3%   44.1%   5.1%   -13.8%
Plastic construction products 19.7%   17.5%   12.4%   9.7%   2.8%
Softwood lumber 113.1%   154.3%   89.0%   37.1%   20.6%
Hardwood lumber 17.7%   36.4%   27.4%   17.2%   3.9%
Millwork 23.2%   19.2%   12.0%   8.5%   4.8%
Plywood 63.6%   98.4%   51.4%   38.6%   14.0%
Particle board & oriented strandboard (OSB) 94.7%   121.5%   39.6%   36.1%   11.4%
Gypsum 7.6%   14.2%   11.6%   7.6%   2.1%
Insulation materials 10.0%   7.0%   8.4%   3.3%   2.4%
Construction sand, gravel & crushed stone 13.8%   4.3%   3.7%   1.4%   0.8%
Cement 5.7%   2.9%   1.5%   0.9%   0.0%
Ready-mix concrete 6.4%   1.9%   3.3%   1.9%   0.0%
Precast concrete products 16.6%   7.7%   6.3%   3.8%   2.0%
Prestressed concrete products 8.3%   2.0%   3.7%   3.0%   1.1%
Brick (clay) 8.5%   5.8%   3.0%   2.5%   1.9%
Coal -4.8%   1.0%   3.2%   1.4%   -0.3%
Iron ore 11.4%   6.6%   3.0%   0.7%   0.1%
Iron & steel scrap 18.9%   76.6%   53.4%   13.6%   5.0%
Steel bars, plates & structural shapes 18.9%   29.0%   30.5%   12.3%   0.7%
Steel pipe & tube 24.5%   29.3%   26.8%   15.3%   2.7%
Fabricated structural metal products 19.7%   18.3%   17.9%   11.4%   4.9%
Prefabricated Metal Buildings 24.5%   27.3%   19.5%   8.6%   2.9%
Aluminum mill shapes 4.3%   28.6%   20.7%   12.7%   2.7%
Flat glass 6.2%   4.0%   3.7%   2.0%   0.2%
Paints, architectural coatings 15.8%   4.8%   4.3%   4.4%   0.4%
Lighting fixtures 12.2%   3.5%   3.3%   2.6%   0.8%
Plumbing fixtures & fittings 9.2%   2.2%   1.7%   1.2%   0.0%
Elevators & escalators 9.0%   2.6%   2.5%   1.0%   0.8%
Heating equipment 15.4%   6.8%   6.5%   4.5%   0.1%
Air conditioning equipment 12.3%   6.6%   5.0%   2.7%   0.9%
Copper wire & cable 27.9%   38.8%   22.1%   13.4%   6.8%
Regular gasoline unleaded 0.4%   151.9%   78.0%   28.7%   8.8%
Diesel Fuel 29.0%   199.2%   61.1%   22.8%   15.6%
Inputs to new construction 20.9%   24.0%   15.8%   9.2%   4.3%
Inputs to new residential construction 23.0%   25.4%   16.4%   9.9%   4.5%
Inputs to new non-res construction 18.8%   22.2%   15.1%   8.5%   4.1%
   Inputs to commercial construction 18.0%   20.5%   14.1%   8.2%   3.9%
   Inputs to healthcare structures 19.0%   21.0%   14.2%   8.3%   3.8%
   Inputs to industrial structures 18.5%   18.1%   12.3%   6.6%   2.9%
   Inputs to highways & streets 14.6%   20.9%   14.4%   8.0%   4.3%
   Inputs to power & communication structures 17.9%   23.2%   16.0%   9.2%   4.4%
   Inputs to educational & vocational structures 20.6%   21.9%   14.7%   8.7%   3.9%
Construction materials (PPI ‘Special Index’) 28.1%   30.0%   24.2%   15.1%   4.6%
The ‘final demand’ indices (at top) reflect the prices paid by owners for the construction of projects. They include material, labor & markups.
The ‘service’, ‘commodity’ and ‘energy’ indices (in the middle section of the table) are based on ‘factory-gate’ sales prices.
The ‘input’ indices (at bottom) reflect costs faced by contractors. They exclude capital investment (i.e., machinery & equipment), labor & imports.
The ‘input’ indices are built up from the ‘service’ (design, legal, transport & warehousing, etc.) ‘commodity’ and ‘energy’ indices.
Data source: Producer Price Index (PPI) series from Bureau of Labor Statistics (BLS).
Table: ConstructConnect.

Please click on the following link to download the PDF version of this article:
Economy at a Glance Vol. 17, Issues 91 and 92 – Latest PPI Results Show Construction Material Cost Increases Still Alarming – PDF


Alex Carrick is Chief Economist for ConstructConnect. He has delivered presentations throughout North America on the U.S., Canadian and world construction outlooks. Mr. Carrick has been with the company since 1985. Links to his numerous articles are featured on Twitter @ConstructConnx, which has 50,000 followers.

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