Construction costs increased once again in March, according to IHS Markit (NYSE: INFO) and the Procurement Executives Group (PEG). The current headline IHS Markit PEG Engineering and Construction Cost Index registered 50.2, a figure barely above the neutral mark. The last time the headline index registered an almost flat pricing was in November 2016. After 40 months, the materials and equipment index came in at 49.4, indicating falling prices. The sub-contractor labor index showed continued price increases, with an index reading of 52.0.
Survey respondents reported falling prices for five out of the 12 components within the materials and equipment sub-index. These included ocean freight (Asia to U.S. and Europe to U.S.), fabricated structural steel, carbon steel pipe, copper-based wire and cable. Prices for five categories rose while prices for two categories (alloy steel pipe and exchangers) remained the same. Index figures for all categories dropped relative to February, indicating that a greater proportion of the respondents are observing lower prices. The sharpest drops were reported for ocean freight.
“Ocean freight has taken a notable hit with the onset of coronavirus,” said Deni Koenhemsi, senior economist with IHS Markit. “As China tried to contain COVID-19, industrial production contracted substantially, and the transportation of goods nearly came to a halt. In the first two months of 2020, U.S. imports from Asia dropped 6.2 percent year-over-year, and imports from China were down 15.5 percent. Although the number of blank sailings is beginning to taper off-meaning we will see higher imports from China to United States-the rapid spread of the virus in Europe and North America could cause the downward trend to continue.”
The sub-index for current subcontractor labor costs came in at 52.0 for March. For the United States, labor cost remained flat in the Northeast, Midwest and West, but increased in the South. For Canada, the labor cost index was flat in western Canada but rose for eastern Canada.
The six-month headline expectations for future construction costs index reflected increasing prices for the 43rd consecutive month, registering 58.2, a sharp decline from February’s reading of 67.6. The six-month materials and equipment expectations index came in at 57.6 this month, down from 68.0 last month. Prices for all materials, equipment and freight are expected to rise with the exception of carbon steel pipe and exchangers, which are expected to see flat pricing. Expectations for sub-contractor labor slipped to 59.7 in March. All regions of the U.S. are expected to see higher labor costs; labor costs in Canada are expected to stay flat.
In the survey comments, respondents noted lower demand conditions due to the coronavirus.
To learn more about the IHS Markit PEG Engineering and Construction Cost Index or to obtain the latest published insight, please click here.
Related Stories
Market Data | Oct 19, 2020
5 must reads for the AEC industry today: October 19, 2020
Lower cost metros outperform pricey gateway markets and E-commerce fuels industrial's unstoppable engine.
Market Data | Oct 19, 2020
Lower-cost metros continue to outperform pricey gateway markets, Yardi Matrix reports
But year-over-year multifamily trendline remained negative at -0.3%, unchanged from July.
Market Data | Oct 16, 2020
5 must reads for the AEC industry today: October 16, 2020
Princeton's new museum and Miami's yacht-inspired luxury condos.
Market Data | Oct 15, 2020
6 must reads for the AEC industry today: October 15, 2020
Chicago's Bank of America Tower opens and altering facilities for a post-COVID-19 world.
Market Data | Oct 14, 2020
6 must reads for the AEC industry today: October 14, 2020
Thailand's new Elephant Museum and the Art Gallery of New South Wales receives an expansion.
Market Data | Oct 13, 2020
5 must reads for the AEC industry today: October 13, 2020
Miami Beach Convention Center renovation completes and guidance offered for K-12 schools to support students with asthma.
Market Data | Oct 12, 2020
Majority of contractors fear long-term business implications of COVID-19, according to Construction Executive survey
While many contractors have not yet seen drastic impacts to their business, as construction was in many areas considered an “essential” service, the long-term implications are concerning.
Market Data | Oct 12, 2020
6 must reads for the AEC industry today: October 12, 2020
4 challenges of realizing BIM's value for an owner and Florida office property is designed for a post-Covid world.
Market Data | Oct 8, 2020
6 must reads for the AEC industry today: October 8, 2020
The first rendering of the National Medal of Honor Museum is unveiled and seven urgent changes needed to fix senior living.
Market Data | Oct 7, 2020
6 must reads for the AEC industry today: October 7, 2020
Water-filled windows' effect on energy and construction begins on PGA of America HQ.