Building Materials Prices Decline for Second Consecutive Month

2022-11-15T14:30:03-06:00

The prices of building materials decreased 0.2% in October (not seasonally adjusted) following a 0.5% decline in September according to the latest Producer Price Index (PPI) report. The index has decreased four of five months for the first time since 2015. The PPI for goods inputs to residential construction, including energy, was led 0.2% higher by prices of diesel fuel (+9.5%) and unleaded gasoline (+5.7%). The price index of services inputs to residential construction decreased 0.7% in October, the seventh consecutive monthly decline. Prices have fallen a total of 14% since the index last increased in March 2022 and are just 1.4% higher than they were a year ago. Softwood Lumber The PPI for softwood lumber (seasonally adjusted) fell 1.7% in October following 5.5% and 3.1% declines in August and September, respectively. Softwood lumber prices are 4.4% higher than they were a year ago but have fallen 41.3% since March. The index remains 3.0% above pre-pandemic levels. Steel Mill Products Steel mill products prices decreased 6.6% in October and have fallen 21.6% since May 2022.  The index is at its lowest level since May 2021 after five straight monthly declines, each of which has been larger than the last. Ready-Mix Concrete The PPI for ready-mix concrete (RMC) increased 0.4% in October but, similar to steel mill products, the pace of increases has slowed each of the past three months. The index has climbed 9.1%, year-to-date, the largest October YTD increase in the series’ 34-year history. The monthly increase in the national data was entirely driven by a 2.0% price increase in the Northeast region. Prices declined in the Midwest (-0.4%) and South (-0.3%) and were unchanged in the West. Gypsum Building Materials The PPI for gypsum building materials edged 0.2% lower in October—just the second monthly decrease since September 2020. The index is 45.6% higher than its January 2020 level. Transportation of Freight The price of truck, rail, and ocean transportation of freight each decreased in October. Trucking freight prices fell 1.4%–the fifth consecutive decline—while the indexes for rail and deep sea transportation of freight decreased 0.7% and 1.8%, respectively. Year-to-date, the prices of ocean, rail, and truck freight transportation have increased 25.2%, 6.5%, and 6.0%. Related ‹ Single-Family Permits Decline in September 2022Tags: Building Materials, building materials prices, construction costs, cost of construction, cost of materials, drywall, Gypsum, inflation, lumber, ppi, producer price index, ready-mix concrete, steel

Building Materials Prices Decline for Second Consecutive Month2022-11-15T14:30:03-06:00

Inflation Shifts to Slowest Pace Since January

2022-11-10T11:17:45-06:00

Consumer prices in October saw the smallest year-over-year gain since January 2022, and while still elevated, inflation experienced the first month below an 8% annual growth rate since February 2022. However, the shelter index continued to rise at an accelerated pace and the energy index increased after declining for three straight months. As inflation appears to have peaked and has started to slow, this may ease some of pressure on the Fed to maintain its aggressive monetary policy. The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) rose by 0.4% in October on a seasonally adjusted basis, following the same increase in September. The price index for a broad set of energy sources rose by 1.8% in October as a decline in natural gas (-4.6%) partly offset an increase in electricity (+0.1%) and gasoline index (+4.0%). Excluding the volatile food and energy components, the “core” CPI increased by 0.3% in October, following an increase of 0.6% in September. Meanwhile, the food index increased by 0.6% in October with the food at home index rising 0.4%. Most component indexes continued to increase in October. The indexes for shelter (+0.8%), motor vehicle insurance (+1.7%), recreation (+0.7%), new vehicles (+0.4%) as well as personal care (+0.5%) showed sizeable monthly increases in October. Meanwhile, the indexes for used cars and trucks (-2.4%), apparel (-0.7%), medical care (-0.5%) and airline fares (-1.1%) declined in October. The index for shelter, which makes up more than 40% of the “core” CPI, rose by 0.8% in October, following an increase of 0.7% in September. This is the largest monthly increase since August 1990. The indexes for owners’ equivalent rent (OER) increased by 0.6% and rent of primary residence (RPR) increased by 0.7% over the month. Monthly increases in OER have averaged 0.7% over the last three months. More cost increases are coming from this category, which will maintain pressure on inflationary forces in the months ahead. These higher costs are driven by lack of supply and higher development costs. Higher interest rates will not slow these costs, which means the Fed’s tools are limited in addressing shelter inflation. During the past twelve months, on a not seasonally adjusted basis, the CPI rose by 7.7% in October, following an 8.2% increase in September. The “core” CPI increased by 6.3% over the past twelve months, following a 6.6% increase in September. The food index rose by 10.9% and the energy index climbed by 17.6% over the past twelve months. NAHB constructs a “real” rent index to indicate whether inflation in rents is faster or slower than overall inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster (slower) than overall inflation, the real rent index rises (declines). The real rent index is calculated by dividing the price index for rent by the core CPI (to exclude the volatile food and energy components). The Real Rent Index rose by 0.4% in October. Over the first ten months of 2022, the monthly change of the Real Rent Index increased by 0.1%, on average. Related ‹ Unsurprisingly, Housing Affordability Continues to FallTags: cpi, inflation, monetary policy

Inflation Shifts to Slowest Pace Since January2022-11-10T11:17:45-06:00

Economic Growth and Signs of Cooling Inflation in Third Quarter

2022-10-27T12:17:44-05:00

Real GDP grew in the third quarter, after shrinking for the first two straight quarters of 2022. This quarter’s growth was mostly fueled by a decline in the trade deficit. More important, the data from the GDP report suggests that inflation is cooling. The GDP price index, rose 4.1% for the third quarter, down from a 9.0% increase in the second quarter. Also, the Personal Consumption Expenditures (PCE) price Index, capturing inflation (or deflation) across a wide range of consumer expenses and reflecting changes in consumer behavior, rose 4.2% in the third quarter, down sharply from 7.3%. Looking forward, a mild recession is expected in the coming year as the Federal Reserve continues to tighten financial conditions. According to the “advance” estimate released by the Bureau of Economic Analysis (BEA), real gross domestic product (GDP) increased at an annual rate of 2.6% in the third quarter, following a 0.6% decrease in the second quarter and a decline of 1.6% in the first quarter. This quarter’s increase reflected increases in exports, consumer spending, nonresidential fixed investment, federal government spending, and state and local government spending, partially offset by decreases in residential fixed investment and private inventory investment. In the third quarter, exports increased 14.4%, while imports, which are a subtraction in the calculation of GDP, decreased 6.9%. Net exports rose by $156.6 billion in the third quarter, contributing 2.77 percentage points to GDP growth. Meanwhile, federal government spending increased 3.7% in the third quarter, reflecting increases in both national defense and nondefense spending, while state and local government spending rose 1.7%, led by an increase in compensation of state and local government employees. Consumer spending rose at an annual rate of 1.4% in the third quarter, down from a 2.0% increase in the second quarter. An increase in services was partly offset by a decrease in goods services. While expenditures on services increased 2.8% at an annual rate, goods spending decreased 1.2% at an annual rate, led by motor vehicles and parts (-11.7%) as well as food and beverages (-3.8%). Nonresidential fixed investment increased 3.7% in the third quarter. Increases in equipment and intellectual property products were partly offset by a decrease in structures. Within residential fixed investment, single-family structures declined 36.3% at an annual rate, multifamily structures declined 5.5% and other structures (specifically brokers’ commissions) decreased 21.5%. Related ‹ Housing Share of GDP Continues to DecreaseTags: economics, gdp, inflation, macroeconomics, macroeconomy, PCE, residential fixed investment, the GDP price index

Economic Growth and Signs of Cooling Inflation in Third Quarter2022-10-27T12:17:44-05:00

Inflation Remains Stubbornly High Despite Fed Rate Hikes

2022-10-13T12:20:18-05:00

Consumer prices eased in September for the third-straight month as declines in energy prices partly offset increases in food and shelter indexes. Despite this slight improvement, inflation remains above an 8% year-over-year rate for the seven straight month. The food and shelter indexes continued to rise at an accelerated pace, with the owners’ equivalent rent index seeing the largest monthly increase since June 1990. Though it is likely that both core PCE and CPI measures of inflation have peaked, the Fed is expected to remain aggressive with respect to tightening monetary policy. It is also worth noting that higher interest rates will have limited effects on rising rent (a function of a lack of attainable housing) or the ongoing labor shortage. The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) rose by 0.4% in September on a seasonally adjusted basis, following an increase of 0.1% in August. The price index for a broad set of energy sources fell by 2.1% in September as a decline in gasoline (-4.9%) partly offset an increase in electricity (+0.4%) and natural gas index (+2.9%). Excluding the volatile food and energy components, the “core” CPI increased by 0.6% in September, as it did in August. Meanwhile, the food index increased by 0.8% in September, the same increase as August. Most component indexes continued to increase in September. The indexes for shelter (+0.7%), medical care (+0.8%), motor vehicle insurance (+1.6%), household furnishings and operations (+0.5%) as well as education (+0.4%) showed sizeable monthly increases in September. Meanwhile, the indexes for used cars and trucks (-1.1%), apparel (-0.3%) and communication (-0.1%) declined in September. The index for shelter, which makes up more than 40% of the “core” CPI, rose by 0.6% in September, following an identical increase in August. The indexes for owners’ equivalent rent (OER) and rent of primary residence (RPR) both increased by 0.8% over the month. Monthly increases in OER have averaged 0.7% over the last three months. More cost increases are coming from this category, which will add to inflationary forces in the months ahead. These higher costs are driven by lack of supply and higher development costs. Higher interest rates will not slow these costs, which means the Fed’s tools are limited in addressing shelter inflation. During the past twelve months, on a not seasonally adjusted basis, the CPI rose by 8.2% in September, following an 8.3% increase in August. The “core” CPI increased by 6.6% over the past twelve months, following an 6.3% increase in August. The food index rose by 11.2% and the energy index climbed by 19.8% over the past twelve months. NAHB constructs a “real” rent index to indicate whether inflation in rents is faster or slower than overall inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster (slower) than overall inflation, the real rent index rises (declines). The real rent index is calculated by dividing the price index for rent by the core CPI (to exclude the volatile food and energy components). The Real Rent Index rose by 0.3% in September. Over the first nine months of 2022, the monthly change of the Real Rent Index increased by 0.1%, on average. Related ‹ Remodeling Market Sentiment Softened in Third Quarter, But Remains PositiveTags: cpi, inflation, monetary policy, owners’ equivalent rent

Inflation Remains Stubbornly High Despite Fed Rate Hikes2022-10-13T12:20:18-05:00

Revolving Consumer Credit Posts Double-Digit Increase in Q2 2022

2022-09-01T17:21:55-05:00

By David Logan on August 31, 2022 • Non-real estate consumer credit grew at a seasonal adjusted annual rate (SAAR) of 8.7% in the second quarter of 2022 according to the Federal Reserve’s latest G.19 Consumer Credit report. Revolving debt climbed 14.6% (SAAR), double the increase in nonrevolving debt (+6.9%). Total consumer credit currently stands at $4.6 trillion, with $1.1 trillion in revolving debt and $3.5 trillion in non-revolving debt. From the previous quarter, total consumer credit increased by $98.9 billion, with revolving debt and non-revolving debt increasing by $40.3 billion and $59.3 billion, respectively. Part of the recent growth in consumer credit—both revolving as well as nonrevolving—is explained by persistently high inflation. The increase in nonrevolving credit owes mostly to higher car prices. Since January 2021, new and used car prices have increased nearly 15% (year-over-year) each month, on average, while sales volume declined. Revolving credit balances can be similarly explained by rising price levels as the 12-month increases for energy and food items averaged 32% and 9% over the first two quarters of 2022. With every quarterly G.19 report, the Federal Reserve releases a memo item covering student and motor vehicle loans’ outstanding levels on a non-seasonally adjusted basis. The most recent memo item indicates that, as of the second quarter of 2022, student loans stood at $1.8 trillion and motor vehicle loans stood at $1.4 trillion. Annualized, the changes in these two categories from the previous quarter are $3.2 billion and $129.1 billion, respectively. Together, these loans made up 88.9% of nonrevolving credit balances (NSA) in the second quarter. Although this share is near the ten-year average (91.4%), it is the smallest since 2011. Related ‹ Home Price Growth Eased in JunePrivate Residential Spending Slides in July ›Tags: auto loans, consumer credit, consumer debt, energy, energy prices, household debt, inflation, non-revolving debt, revolving debt, student loan debt

Revolving Consumer Credit Posts Double-Digit Increase in Q2 20222022-09-01T17:21:55-05:00

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