A recent analysis of the Bureau of Labor Statistics (BLS) Producer Price Index (PPI) for October, focusing on building materials costs, reveals a slight 0.2% decrease in prices for inputs to new residential construction—excluding capital investment, labor, and imports. Over the past year, the index has risen by 0.3%, following a 0.1% drop in September.

According to the National Association of Home Builders (NAHB), the inputs to the new residential construction price index are split into two main categories—goods and services. While the goods component saw a year-over-year increase of 0.7%, the services component declined by 0.4%. In contrast, the overall final demand index for October rose 2.4% year-over-year, with goods up 0.2% and services up 3.5%.

Input Goods

The goods component is the larger of the two categories, accounting for around 60% of the total residential construction price index. Prices for goods inputs to residential construction increased by 0.3% in October.

When excluding energy, the price of residential construction goods rose 2.0% compared to a year ago, a larger increase than the 1.4% rise seen in September. This marks the first year-over-year increase since April. The index for energy-related inputs, however, fell by 13.1% year-over-year, continuing a trend of yearly declines for the third consecutive month.

Input Services

Prices for services inputs to residential construction fell by 1.0% in October, according to NAHB. The service inputs are broken down into three categories: trade services, transportation and warehousing services, and services excluding trade, transportation, and warehousing.

Trade services, the largest category (60%), saw a decrease of 1.5% year-over-year, reversing a 0.6% increase in September. This marked the first decline since August 2023, when the trade services index dropped by 1.2%.