Construction Costs Rise for 10th Consecutive Month
Construction costs rose again in August, according
Markit and the Procurement Executives Group (PEG).
IHS Markit PEG Engineering and Construction Cost
registered 54.0, up from 51.3 in July. Both material/equipment and
labor sub-indexes registered rising prices.
The materials/equipment price index registered 54.2
in August, slightly higher than the July figure of 52.4. Price
increases were uneven. Eight of the 12 categories tracked in the
materials index showed higher prices, three categories registered
flat pricing and one - ocean freight from Europe to the U.S. - had
falling prices. Prices remained flat for fabricated structural
steel, exchangers and ocean freight from Asia to the U.S.
Copper-based wire and cable increased once again, approaching the
index figures last seen at the beginning of 2017.
"Commodity prices have risen strongly in the past
seven weeks, with copper on the London Metal Exchange, jumping 14
percent between early June and August," said John Mothersole,
director Pricing and Purchasing, IHS Markit. "Better data from
China, a softer U.S. dollar and new fears about mine supply
disruptions have combined to lift prices. The market, however,
looks overbought. If possible, we would avoid purchases at the
moment and await what we believe will be a modest
The current subcontractor labor index rose in
August, with the index coming in at 53.4. Regionally, costs rose in
all four regions of the U.S., but the overall index was pulled down
by Canada. Labor costs fell in eastern Canada and they were flat in
The six-month headline expectations index recorded
another month of increasing prices, moving down only slightly from
68.3 in July to 68.2 in August. The materials/equipment index
stayed positive, at 71.2. Twelve consecutive months of rising
prices affirm widespread expectations of future higher costs.
Unlike current material/equipment prices, expectations for future
price increases were more widespread, with index figures for every
component coming in strongly above neutral. Price expectations for
sub-contractor labor came in at 61.4 in August. Labor costs are
expected to rise in all U.S. regions and western Canada. Eastern
Canada registered softer future price expectations.
In the survey comments, participants noted an
anticipation for higher activity.
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