Analysis
April 25, 2018
Construction Costs Increase Faster in April
Written by Sandy Williams
Construction costs increased for the 18th consecutive month in April, according to the latest data from IHS Markit and the Procurement Executives Group.
The IHS Markit PEG Engineering and Cost Construction Index jumped 4.1 points from March to April to register 61.8. Indexes for materials/equipment and labor were both above 50, indicating rising prices.
Prices for materials/equipment rose at a faster pace in April with the index climbing 6.3 points to 65.7. Steel prices jumped in April for fabricated structural steel, carbon steel pipe, and alloy steel pipe.
“Steel buyers seem paralyzed by the uncertainty around 232 and 301 tariffs. When the cost is unknowable and availability is dubious, rational behavior is to do nothing,” said John Anton, associate director – pricing and purchasing, IHS Markit (and a speaker at our 2018 SMU Steel Summit Conference). “Hopefully, clarity will come by May 1, the due date for a decision on country exemptions.”
Costs for subcontractor labor rose at a slower rate in April, down 1.1 point, but were evident in all regions of the U.S.
The six-month outlook suggests prices will continue to expand for materials and equipment, as well as for labor.
Survey respondents are expecting a shortage of electrical engineers, welders and carpenters in 2018. Respondents also expressed worries about U.S. trade policy developments.
About the Engineering and Construction Cost Index
The IHS Markit PEG Engineering and Construction Cost Index (ECCI) is a diffusion index. It is based on data independently obtained and compiled by IHS Markit from procurement executives in leading engineering, procurement and construction firms. The headline index tracks trends in the heavy construction industry, identifies market turning points in project costs, and acts as a leading indicator for wage and material inflation specific to this industry.
