Prices for residential building materials rose again in July, marking the largest year-over-year increase in over two years. The underlying price growth trend remained the same, with service prices continuing to grow at a faster pace than goods prices. Similar to last month, parts for construction machinery and metal molding/trim experienced significant price growth, as both increased over 25% compared to last year.

Prices for inputs to new residential construction—excluding capital investment, labor, and imports—rose 0.2% in July, following a 0.8% increase in June. These figures are taken from the most recent Producer Price Index (PPI) report published by U.S. Bureau of Labor Statistics. The PPI measures prices that domestic producers receive for their goods and services; this differs from the Consumer Price Index which measures what consumers pay and includes both domestic products as well as imports.

The inputs to the new residential construction price index grew 2.8% from July of last year. The index can be broken into two components­—the goods component increased 2.4% over the year, while services increased 3.3%. For comparison, the total final demand index, which measures all goods and services across the economy, increased 3.3% over the year, with final demand with respect to goods up 1.9% and final demand for services up 4.0%.




Here is the tally of 10 key commodities tracked by HBSDealer:

Construction inputs and building materials prices mostly rose compared to last month, with a few exceptions including plywood (-0.6%), softwood lumber (-0.2%), paint materials (-0.5%), and cement and concrete products (both -0.2%). Year-over-year, meanwhile, softwood lumber prices are up 7.7%, and hardwood lumber is up 5.4%. Hardware prices, which rose 1.3% month-over-month, are up 6.4% on a yearly basis.


According to Associated Builders and Contractors, construction input prices increased 0.4% in July compared to the previous month. Overall construction input prices are 2.2% higher than a year ago, while nonresidential construction input prices are 2.6% higher.

ABC Chief Economist Anirban Basu: “Nonresidential input prices have risen at a 5.8% annualized rate since January, and trade policy will likely continue to put upward pressure on materials prices over the next several months. Copper wire and cable prices, for instance, surged 5% in July and are now up 12.2% over the past year."

“The rapid increase in broader producer prices in July is just as worrying as rising construction input costs,” Basu continued. “With prices for final demand goods and services rising at the fastest pace since March 2022, the Federal Reserve will have to consider the prospect of resurgent inflation when deciding whether or not to cut rates at its September meeting. The construction industry is in desperate need of lower borrowing costs, and higher rates for longer would continue to weigh on construction spending.”

Source:  hbsdealer.com