Materials & Equipment Prices Drive Engineering & Construction Cost Increases, IHS Markit Says

New York, New York (August 21, 2019)—United States construction cost increases were widespread in August, according to IHS Markit and the Procurement Executives Group (PEG). The current headline “IHS Markit PEG Engineering and Construction Cost Index” registered 59.9 in August, a slight dip from July’s reading of 63.2, recording the 34th consecutive month of construction cost increases. Both the materials and equipment, and sub-contractor labor indexes indicated continued price increases, with readings of 59.5 and 61.0, respectively.

Survey respondents reported increasing prices for 11 out of the 12 components within the materials and equipment sub-index. Furthermore, several categories within the diffusion index, such as ready-mix concrete, wire and cable, alloy steel pipe, and fabricated structural steel products, increased relative to last month. Equipment categories, such as transformers, turbines, pumps and exchangers also posted increasing prices; however, the index figure was lower compared to last month. Yet again, carbon steel pipe prices were flat.

“Alloy steel pipe prices are seeing some upward pressure from rising nickel prices; however, carbon steel pipe prices remain flat due to weakness in demand from the upstream oil and gas sector and excess inventory levels,” said Amanda Eglinton, associate director, IHS Markit. “Steel mills announcing price increases for hot rolled coil has put a temporary floor under carbon steel pipe prices; however, pipe prices did not decline to nearly the extent that hot rolled coil has over the past year, presenting some further downside potential.”

The sub-index for current subcontractor labor costs reported rising labor costs in all regions of the U.S. and in both eastern and western Canada.

The 6-month headline expectations for future construction costs index reflected increasing prices for the 36th consecutive month, with the index continuing its rise to 74.4 from 72.5 in July. The 6-month materials and equipment expectations index registered 75.8 this month, up from 71.1 last month. All materials registered increasing prices. Expectations for subcontractor labor came in at 71.2 in August, down from 76.0 in July, with labor costs expected to rise in all regions of the U.S. and western Canada.

In the survey comments, respondents continue to indicate shortages skilled trade workers. For more information, visit ihs.com.