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Despite Coronavirus Impact, Engineering and Construction Costs Increased in February, IHS Markit Says

Despite Coronavirus Impact, Engineering and Construction Costs Increased in February, IHS Markit Says

February 26, 2020



NEW YORK (February 26, 2020) – Construction costs increased once again in February, according to IHS Markit (NYSE: INFO) and the Procurement Executives Group (PEG). The current headline IHS Markit PEG Engineering and Construction Cost Index registered 59.1 in February, marking the 40th consecutive month of construction costs increases. Both the materials and equipment and the sub-contractor labor indexes indicated continued price increases, with readings of 60.5 and 55.8, respectively. 

Survey respondents reported increasing prices for 11 out of the 12 components within the materials and equipment sub-index, with carbon steel pipe pricing turning flat this month after dropping for five consecutive months. Index figures for eight categories increased relative to January. Respondents noted increasing prices for the remaining four categories, ocean freight (Asia to U.S. and Europe to U.S.), alloy steel pipe and copper wire and cable though the index figures for these categories backed off compared to January. 

“The coronavirus outbreak in mainland China has altered the outlook for raw commodities,” said John Mothersole, director of research at IHS Markit. “Copper's outlook for the first half of 2020 has swung from one of deficit and rising prices to a potential surplus and weak pricing. However, price declines at the commodity level may take up to six months to filter through to semi-finished goods like wire and cable. Buyers should seize the opportunity of softer commodity prices to push fabricators and mills for concessions given the uncertainty over demand. We believe weakness in commodity prices will be short lived, with prices likely to recapture much of their recent losses over the next two quarters eliminating current negotiating opportunities.”

The sub-index for current subcontractor labor costs reported rising labor costs in the Northeast, Midwest and Southern United States. The labor cost index was flat in the western United States. It rose in Eastern and Western Canada. 

The six-month headline expectations for future construction costs index reflected increasing prices for the 42nd consecutive month, registering 67.6, eight points lower than January, but still indicative of higher prices ahead. The six-month materials and equipment expectations index came in at 68.0 this month, down from 76.8 last month. Prices for all materials, equipment and freight are expected to rise. Expectations for sub-contractor labor slipped to 66.5 in February, however all regions of the U.S. and Canada still indicate rising labor costs over the next six months. 

In the survey comments, respondents noted shortages for welders and other craft labor.

To learn more about the IHS Markit PEG Engineering and Construction Cost Index or to obtain the latest published insight, please click here.

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About IHS Markit ( www.ihsmarkit.com)

IHS Markit (NYSE: INFO) is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 business and government customers, including 80 percent of the Fortune Global 500 and the world’s leading financial institutions. Headquartered in London, IHS Markit is committed to sustainable, profitable growth.

IHS Markit is a registered trademark of IHS Markit Ltd. and/or its affiliates. All other company and product names may be trademarks of their respective owners © 2020 IHS Markit Ltd. All rights reserved.

News Media Contact: 

Mel Phillips

Press Team

IHS Markit

+1 303 858 6417

+1 212 931 4941

press@ihsmarkit.com

mel.phillips@ihsmarkit.com

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