Building materials price growth slowest since 2015

Building materials prices lumber
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According to the National Association of Home Builders, prices paid for goods used in residential construction advanced 0.2% in December (not seasonally adjusted), citing the latest Producer Price Index (PPI) released by the Bureau of Labor Statistics.

Building materials prices increased 0.1% per month, on average, in 2019. The price of goods used in residential construction rose 1.5% over the year, representing a 0.4ppt slowdown from the pace of increases in 2018 (1.9%). The last year building materials prices increased less than 1.5% was 2015—a year in which prices actually declined 1.8%.

NAHB cites a PPI report showing that softwood lumber prices increased 0.1% (seasonally adjusted) in December and 6.7% over the course of 2019. Although this is directionally consistent with Random Lengths data, that data shows softwood lumber prices rising 14.5% in 2019.

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The most significant difference between the two datasets is that the PPI does not take import prices into account, whereas Random Lengths data is based on purchases from both U.S. as well as Canadian mills. Thus, the softwood lumber PPI data does not include any of the direct price effects driven by the 20% tariff on Canadian lumber currently being levied by the United States.

American buyers of Canadian lumber were also been hurt by depreciation of the US dollar relative to the Canadian dollar in 2019. Not only did the price of softwood lumber rise in 2019, but the US dollar also depreciated 4.6% against the Canadian dollar over the period.

See more at NAHB’s Eye on Housing blog.

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