Construction Costs Continue to Rise in September

Sept. 28, 2017

Construction costs are still on the rise, according to the IHS Markit PEG Engineering and Construction Cost Index. “Costs rose to the highest point in the last year in September,” said the release from IHS Markit.

The index reading for this month was 58.4, up from 54 in August. The material/equipment and labor subindexes were also elevated on a month-to-month basis. The materials/equipment index jumped to 59.3 this month after a level of 54.2 last month. Subcontractor labor inched forward to 56.4, up three points from August. The current pricing index and materials/equipment subindex saw a reading of at least 50 (representing upward pricing strength) for the 11th and 10th straight month respectively, while subcontractor labor was above the threshold for the second consecutive month.

Meanwhile, September was the 13th consecutive month of increasing prices for the headline expectations index for the next six months. The index, however, did decrease 1.2 points to 67. Expected pricing in the materials/equipment subindex also saw a 13th straight month of upward pricing, but declined 3.4 points from August. Subcontractor labor pricing in the next six months increased to a reading of 65.2, the 12th month in a row of increasing prices.

All categories in the current materials index pricing had higher prices, including ocean freight prices from Asia to the U.S. and from Europe to the U.S. “Global demand for marine transportation is improving, both in the bulk segment and in the container segment,” said Paul Robinson, associate director of pricing and purchasing with IHS Markit. “Buyers outside of the United States should avoid locking in rates until prices pull back in 2018,” he added.

Current labor costs rose in all four U.S. regions, and they are expected to increase across the U.S. and Canada.

– Michael Miller, editorial associate

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