Largest Four-Month Lumber Price Increase in 70 Years Outweighs Other Price Declines in August

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Prices paid for goods used in residential construction continued their upward trend in August, increasing 0.9% (not seasonally adjusted) according to the latest Producer Price Index (PPI) report released by the Bureau of Labor Statistics. It is the fourth consecutive monthly increase since the index declined three months straight and brings the index back to its pre-pandemic level. Prices of excluding energy increased 1.0% over the month.

The four-month increase is almost exclusively due to the dramatic rise in softwood lumber prices, which advanced 14.9% in August. Prices have increased nearly 50% since April, the largest four-month gain in the history of the unadjusted data series which dates back to 1949.

It is the second-largest increase since seasonally adjusted data has been available since 1975. The index has decreased 1.3% year-to-date (YTD), a larger decline than the prior record for a July YTD decrease (-0.9% in 2000). Prices paid for goods used in residential construction have only fallen five times between January and June since 2000.

In addition to nominal price increases and tariffs on Canadian lumber, cross-border purchasers have been hurt by a weakening U.S. dollar (USD) in recent months. Since late-March, the USD has depreciated nearly 10%.

Prices paid for gypsum products fell 0.2% in August following a 0.4% decrease in July (seasonally adjusted). The price index for gypsum products has risen 0.5% over the past 12 months and is 8.3% lower than the most recent peak reached in March 2018.

Gypsum product prices have declined 3.1% YTD. Prices paid for gypsum increased 8.6% per year, on average from 2012 to 2017. In contrast, prices decreased 4.0% and 2.8% in 2018 and 2019, respectively.

Nationally, prices paid for ready-mix concrete (RMC) fell 0.3% in August (seasonally adjusted), mostly offsetting a 0.3% increase in July.

Prices fell in the Northeast (-2.1%) and Midwest (-2.3%), were flat in the South region, and increased 2.5% in the West (not seasonally adjusted).

Other changes in indexes relevant to home building and infrastructure are shown below.



Tags: Building Materials, Gypsum, inflation, ppi, producer price index, ready-mix concrete, softwood lumber