A little lethargy in the increasing cost of building materials in the United States and Canada


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Newspaper headlines no longer scream about the sharp rise in timber prices. The very steep gains are over and the pullback phase has stabilized. It was to be expected that there would be a moderation in price due to the start of housing settlement and home renovation projects being put on the back burner, as the leisure days of summer were replaced by the more fast paced days of autumn. The July Producer Price Index (PPI) for softwood lumber, as shown in Table 1, was -16.3% compared to three months in April. The last price change from month to month was -29.0%. However, as shown in Table 1 and Figure 1, the rise in prices for other forest products, and for a large number of other inputs used in the construction process, has not subsided much. Plywood and particleboard/OSB board prices are two times higher throughout the year and by a third over the last three months (which will be referred to as a quarter, a quarter or a quarter). Month to month in July, plywood was +3%, particleboard/OSB +7%. Steel bars, plates and structural shapes in July were +43.7% YoY, +10.5% over the last three months, and +6.0% MoM. Iron and steel scrap used in electric arc steelmaking furnaces was +103.8% y/y, + 16.3% q/q, + 0.8% m/m. Interestingly, the Consumer Price Index (CPI) for used cars and trucks, the final primary source of steel scrap, was also higher by an extraordinary amount in July, +41.7%. The PPI in “Steel Pipes and Tubes” in July was +48.8% yoy, +16.4% q/q, and +9.0% monthly. The July aluminum mill figure PPI was +33.2% yoy, +6.9% q/q, and +1.5% m/m. Some other dramatic year-over-year increases in the PPI subcategory in July were: gasoline and diesel fuel, just over +80%; gypsum + 22%; insulation material, + 12%; Air conditioning and heating equipment, about + 10%; Architectural Paints and Coatings, also +10%; and flat glass, + 9.5%. The only PPI sub-index that posted a decline after just -0.1% monthly in July, other than softwood -29.0%, was copper wire and cable, down -1.6%. On an annual basis, Copper Wire and Cable was up a third, +33.1%. The bottom line is that bid prices are still failing, in an epic fashion, to keep pace with increases in material cost. This is clearly illustrated in Chart 2, where the two PPI material price measures currently range from plus one quarter to plus one third (+25.4% to +33.1%), while the PPI is on an annual basis. Only +4.5%. The PPI series’ historical representations of 28 building entries are outlined in seven cluster diagrams (of four graphs each) shown below. At the end of this article is Table 2 with prices for Canadian building products. The most impressive gains are indicated by red arrows. The Canadian results generally reflect what was happening in the United States. The main exception is that Canadian data only runs through June, a month behind the US numbers. Therefore, the recent decline in timber prices has not yet been recorded. Chart 1: US Building Materials Cost Changes from the PPI Series – July 2021 Data source: Bureau of Labor Statistics (BLS) Charts: ConstructConnect. Table 1: US Producer Price Index (PPI) Results Percentage change in July 2021 index from: 3 years 1 year 6 months 3 months ago 1 month ago Final demand/service/goods/energy/inputs: final demand build 12.8% 4.5% 4.6% 2.8% 1.5% Construction of new warehouses 13.5% 6.5% 6.3% 4.2% 2.6% Construction of new school buildings 13.1% 3.3% 3.8% 2.5% 2.4% Construction of a new administrative building 13.5% 5.9% 5.3% 2.8% 1.3% Construction New industrial 14.2% 3.9% 3.9% 3.0% 2.6% New healthcare building construction 11.2% 3.2% 4.1% 1.4% -0.2% Architectural and engineering services 5.2% 3.3% 0.5% 0.6% 0.2% Construction machinery and equipment 12.1% 4.5% 2.7% 3.0% 1.2% Asphalt 0.7% 57.1% 52.1% 1.8% 6.5% Plastic Building Products 29.3% 26.7% 20.1% 10.8% 4.5% Softwood 47.9% 45.0% -1.0% -16.3% -29.0% Hardwood 27.4% 45.8% 27.8% % 10.4% 6.3% Artwork 25.9% 21.8% 13.4% 8.0% 0.1% Plywood 93.7% 102.8% 67.7% 34.7% 2.6% Particle and Oriented Board (OSB) 132.0% 132.5% 56.1% 33.0% 6.8% Gypsum 13.3% 21.6% 14.3% 8.2% 2.6% Insulation Material 12.4% 11.8% 7.7% 4.7% -0.1% Inch Sand E, gravel and crushed stone 13.4% 4.1% 2.5% 1.2% 0.2% Cement 7.1% 3.2% 2.8% 1.7% -0.1% Ready Mix Concrete 8.5% 2.8% 3.3% 0.9% 0.0% Precast Concrete Products 16.9% 9.2% 5.8% 3.5% 1.3% Prestressed Concrete Products 12.7% 9.3% 9.8% 7.8% -0.1% Brick (clay) 8.9% 4.3% 2.8% 2.2% 0.4% Coal -3.3% 2.6% 3.3% 0.3% 0.3% Iron Ore 28.6% 23.7% 19.4 % 18.6% 14.6% Scrap iron and steel 35.4% 103.8% 11.3% 16.3% 0.8% Structural steel bars, plates and shapes 26.1% 43.7% 35.3% 10.5% 6.0% Steel tubes and tubes 33.7% 48.8% 36.4% 16.4% 9.0% Structural metal products manufactured 29.2% 28.8% 24.7% 14.0% 2.8% Prefab Metal Buildings 39.6% 45.9% 31.7% 18.2% 8.4% Aluminum Factory Forms 9.9% 33.2% 18.4% 6.9% 1.5% Flat Glass 9.5% 7.3% 4.3% 3.3% 0.6% Pain ts , Architectural Coatings 21.6% 9.9% 10.4% 5.7% 4.5% Lighting Fixtures 12.3% 5.0% 4.4% 2.1% 0.9% Plumbing Fixtures and Fixtures 10.0% 3.5% 2.4% 0.7% 0.2% Elevators and Escalators 9.5% 3.7% 3.5% 1.9% – 0.1% Heating Equipment 16.5% 10.7% 10.2% 3.9% 0.7% Air Conditioning Equipment 14.5% 9.0% 6.0% 3.5% 0.8% Main Copper Wire & Cable 23.0% 33.1% 15.4% 7.1% -1.6% Unleaded Regular Gasoline 9.4% 80.6% 53.0% 18.1% 8.5% Diesel Fuel 26.9% 81.9% 40.0% 16.3% 4.0% New Construction Input 25.7% 25.4% 15.6% 9.2% 0.9% New Residential Construction Input 28.7% 27.8% 16.9% 10.1% 0.8% Input to New Non-High Accuracy Construction 22.8% 23.1% 14.3% 8.4% 1.0% Commercial Building Input 22.1% 22.3% 14.0% 8.3% 1.1% Structures Input Healthcare 22.8% 22.3% 13.8% 7.9% 0.8% Input to Industrial Structures 22.8% 20.4% 12.5% ​​7.5% 1.5% Input to Highways and Streets 18.3% 20.9% 13.6% 8.4% 1.1% Input to Energy and Communication Structures 21.7% 23.8% 15.1% 8.7% 1.0% Input to Educational and Professional Structures 24.2% 22.9% 13.8% 7.7% 0.5% Building Materials (PPI ‘Special Index’) 31.6% 33.1% 23.0% 8.8% 0.2% ‘final demand’ indicators (above) reflect prices paid by the owners for setting up the projects. It includes materials, labor and profits. The indicators “Service”, “Goods” and “Energy” (in the middle section of the table) are based on the “factory gate” sales prices. Input indicators (below) reflect the costs that contractors face. It excludes capital investment (i.e. machinery and equipment), labor and imports. The “input” indicators are generated from the “service” (design, legal, transport and warehousing, etc.) indicators “commodity” and “energy”. Data source: Producer Price Index (PPI) series from the Bureau of Labor Statistics (BLS) Table: ConstructConnect. Graph 2: US construction bid prices vs material input costs – July 2021 Latest data points for July 2021. Graph: ConstructConnect. Data source: Bureau of Labor Statistics, Producer Price Index dataset. Diagram: ConstructConnect. Chart set 1 – Forest Products: US Building Materials Costs (1) – Producer Price Index (PPI) Series Last data points are for July 2021. Data source: US Bureau of Labor Statistics (BLS), Producer Price Index (PPI) PPI), not seasonally adjusted (NSA) Charts: ConstructConnect. Chart set 2 – Steel Products: US Building Materials Costs (2) – Producer Price Index (PPI) Series Last data points are for July 2021. Data source: US Bureau of Labor Statistics (BLS), Producer Price Index (PPI) ), not seasonally adjusted (NSA) charts: ConstructConnect. Chart set 3 – Cement: US building materials costs (3) – Producer Price Index (PPI) series Last data points are for July 2021. Data source: US Bureau of Labor Statistics (BLS), Producer Price Index (PPI) series , not seasonally adjusted (NSA). Diagrams: ConstructConnect. Chart set 4 – Primary Input: US Building Materials Costs (4) – From the Producer Price Index (PPI) Series Last data points are for July 2021. Data source: US Bureau of Labor Statistics (BLS), Producer Price Index (PPI) PPI), non-seasonally adjusted (NSA) graphs: ConstructConnect. Chart set 5 – Energy related: US building materials costs (5) – Producer Price Index (PPI) series Last data points are for July 2021. Data source: US Bureau of Labor Statistics (BLS), Producer Price Index (PPI) , Not Seasonally Adjusted (NSA) Charts: ConstructConnect. Chart set 6 – Accessories and Artery: US Building Materials Costs (6) – From the Producer Price Index (PPI) Series Last data points are for July 2021. Data source: US Bureau of Labor Statistics (BLS), Producer Price Index (PPI) PPI), not seasonally adjusted (NSA) Charts: ConstructConnect. Chart Set 7 – Equipment: US Building Materials Costs (7) – Producer Price Index (PPI) Series Last data points are for July 2021. Data source: US Bureau of Labor Statistics (BLS), Producer Price Index (PPI) ) Series, not seasonally adjusted (NSA). Diagrams: ConstructConnect. Table 2: Canadian building materials costs based on the IPPI series from Statistics Canada Data source: IPPI Statistics Canada series, Table 18-10-0266-01. Table: ConstructConnect.


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