December Construction Material Costs Rise

Engineering and construction costs rose for the second consecutive month in December, says IHS Markit and the Procurement Executives Group (PEG). The ‘IHS Markit PEG Engineering and Construction Cost Index’ registered 61 in December. After showing falling prices for the previous nine months, the materials and equipment portion of the index finally moved into growth territory, reflecting market optimism surrounding COVID-19 vaccine distribution. The materials and equipment sub-index reached 63.4, indicative of broader acknowledgement of higher prices. The sub-contractor portion also rose above 50, to 55.4, indicating respondents are seeing rising costs in this category as well. For the materials and equipment sub-index, nine out of 12 components had rising prices and respondents reported no price decreases, with three categories reporting flat pricing. This was a stark change from last month when seven categories within the materials and equipment sub-index had falling prices and only five had increasing prices. The sub-index for current subcontractor labour costs came in at 55.4 in December. Labour costs were higher across most regions in the U.S. and Canada. The sub-index for eastern Canada was the sole reporter of flat prices. The six-month expectations for future construction costs index surpassed the 50-point mark once again in December; however, the reading of 75.1 was lower than November’s total of 78.1, indicating price increases were not as widespread in December.