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Lumber Volatility Reaches 75-Year High as Material Prices Increase 1.5% in December

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Building Materials

Lumber Volatility Reaches 75-Year High as Material Prices Increase 1.5% in December

The never-ending woes of softwood lumber prices strike the building industry yet again


January 17, 2022
lumber materials
Image: Stock.adobe.com

The latest Producer Price Index released by the Bureau of Labor Statistics shows a 1.5% increase in the prices of goods used in residential construction ex-energy, The NAHB’s Eye on Housing reports. Prices for building materials rose 15.9% throughout 2021, driven by large price gains for softwood lumber, which have risen 44.5% since September.

Between 1947 and 2019, the monthly change in prices for softwood lumber averaged 0.3%, but since January 2020, the index has measured an average 12.0% price change. Ready-mix concrete also saw sizable gains in 2021, though monthly changes suggest a strong potential for price deceleration in 2022.

The PPI of most durable goods for a given month is largely based on prices paid for goods shipped, not ordered, in the survey month. This can result in lags relative to cash market prices, suggesting another sizable increase in the softwood lumber producer price index may be in the next PPI report.

Record-high volatility of softwood lumber prices continues to be as problematic as high prices. The monthly change in softwood lumber prices averaged 0.3% between 1947 and 2019. In contrast, the percent change of the index has averaged 12.0% since January 2020—the highest 24-month average since data first became available 1947 and nearly triple the previous record.

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