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Prices for US goods used in non-energy residential construction rose 1.5% in December (not seasonally adjusted), according to the latest Producer Price Index (PPI) report from the Bureau of Labor Statistics. The index was propelled higher by significant increases in wood product prices, as National Association of Home Builders (NAHB) reported.

Building material prices rose 15.9% in 2021 and 18.6% since December 2020. Since falling 1.8% between July and August 2021, the index has climbed 4.5%.

The residential construction services input price index rose 0.4% in December after a five-month period in which the index fell 13.6%. The index is 9.6% higher than 12 months ago and 19.6% higher than January 2020.

The softwood lumber PPI (seasonally adjusted) rose 24.4% in December and 44.5% since September. According to data from Random Lengths, the “factory price” for structural lumber has almost tripled since the end of August.

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

Record volatility in softwood lumber prices continues to be as problematic as high prices. The monthly change in softwood lumber prices has averaged 0.3% between 1947 and 2019. In contrast, the index’s percentage change has averaged 12% since January 2020 – the average over 24 months the highest since data first became available in 1947 and nearly triple the previous record. .