Construction Material Costs Overall Continue Rise, While Lumber Drops

Washington, DC, August 16, 2021-Materials costs continued to outstrip bid prices in the 12 months ending in July despite a recent drop in lumber and copper prices, reports Associated General Contractors of America.

“The producer price index (PPI) for new nonresidential building construction-a measure of the price that contractors say they would charge to build a fixed set of buildings-increased 1.7% from June and 4.4% year-over-year (y/y) since July 2020, while the PPI for material and service inputs to construction industries climbed 0.9% and 25.6%, respectively, the Bureau of Labor Statistics (BLS) reported on Thursday. Numerous inputs rose at double- and even triple-digit y/y percentage rates. The PPI for steel mill products soared 11% for the month and 109% y/y; diesel fuel, 4.0% and 82%, respectively; lumber and plywood, -16% in July but up 57% y/y; copper and brass mill shapes, -1.4% and 49%, respectively; aluminum mill shapes, 1.5% and 33%; plastic construction products, 4.5% and 27%; gypsum products, 2.6% and 22%; truck transportation of freight, 0.6% and 14%; insulation materials, -0.1% and 12%; and asphalt felt and coatings, 1.1% and 10%. Bid prices, as measured by PPIs for new buildings and subcontractors, have risen at diverse rates. PPIs rose 6.5% y/y for new warehouse building construction, 5.9% for offices, 3.9% for industrial buildings, 3.3% for schools, and 3.2% for healthcare buildings. PPI increases for new, repair, and maintenance work ranged from 6.2% for roofing contractors to 5.4% for concrete and 3.5% each for electrical and plumbing contractors. AGC posted tables and graphs of construction PPIs.

“…Lumber futures have continued the plunge that began in early May, closing on Thursday at $500 per 1000 board feet, down 34% y/y and down 71% from the peak on May 7. A slowdown in home building and renovation has cut into demand, while sawmills have increased production. However, ‘Over the past three weeks we’ve seen renewed interest,’ Kyle Little, chief operating officer at wholesale distributor Sherwood Lumber told CNBC on Thursday. ‘Our renewed interest is now turning into actual orders and people placing business here for the second half of this year, most notably in the commercial segment and into the multifamily segment.’”

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