Construction Pricing Continues Rise in 2018

Feb. 5, 2018

A new year has not halted the rise in construction costs. The IHS Markit PEG Engineering and Construction Cost Index increased 1.4 points to a reading of 56.3 in January. This is the 15th straight month the current pricing headline cost index showed upward pricing strength, a reading above 50.

The current materials/equipment and subcontractor labor indexes also remained in upward pricing territory. The materials/equipment index moved ahead more than four points last month, and all but one of the 11 industries reported price increases. Turbines and heat exchanges had lower prices.

“Rates have risen, but mostly in line with costs,” said IHS Markit Pricing and Purchasing Associate Director Paul Robinson referring to the ocean freight sub-indexes in the release. “Worryingly, the alliances have been unable to stem the tide of ship orders, risking continued oversupply. In the short term, they have been more successful in pushing cost increases on to customers than the individual companies were in the past.”

Subcontractor labor prices were on the plus side of 50 for the sixth consecutive month even with the category’s more than five-point decline to start the year. Prices were constant in the Northeast and Midwest, but prices rose in the South and West. In Canada, labor prices dropped in the West, while the East was flat.

On the bright side, expected construction prices in six months are predicted to drop. The overall price forecast index dipped slightly in January, but it is in its 17th straight month of upward pricing. The future materials/equipment index is also in its 17th consecutive month with a reading above 50. The subcontractor labor index for expected pricing in six months also had a drop last month, yet it is in its 16th month in a row in upward pricing.

-Michael Miller, associate editor

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