Residential building material prices rose in June, driven primarily by higher construction machinery and equipment part prices, based on data from the most recent Producer Price Index (PPI). Metal commodities also experienced significant increases, following recently implemented tariffs on steel and aluminum.

Prices for inputs to new residential construction — excluding capital investment, labor, and imports — rose 0.7% in June, following a (revised) flat change in May.

Meanwhile, price growth for services used in construction continues to outpace both domestic and imported goods. The inputs to the New Residential Construction Price Index grew 2.6% from June of last year. The index can be broken into two components: The goods component increased 2.1% over the year, while services increased 3.3%. For comparison, the total final demand index, which measures all goods and services across the economy, increased 2.3% over the year, with final demand with respect to goods up 1.7% and final demand for services up 2.7%.

Impact of Tariffs

Tariffs on building materials do not directly show up in the PPI data because the PPI measures prices for domestically produced goods and services. In fact, tariffs and taxes are explicitly excluded from the PPI. Despite this, price changes in reaction to tariffs are included in the PPI, meaning price increases to pass on increased costs of materials will show up in this pricing data. Announced tariffs in recent months have resulted in material increases across a few different goods, specifically certain metal products and equipment.

In June, the largest year-over-year price increase was for construction machinery and equipment parts, reporting a 24.2% increase. Meanwhile, metal molding and trim prices were up 15.1%, fabricated steel plate prices were up 13.6%, ornamental and architectural metal work prices were up 9%, and fabricated structural metal prices were up 9% compared to last year. Metal commodities have been the primary targets of tariffs, with 50% tariffs in effect on steel and aluminum products and a potential 50% tariff on copper products coming this August.

Jesse Wade, NAHB director of tax and trade policy analysis, provides more in this Eye on Housing post.