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Engineering and Construction Materials Prices Fall for First Time in 40 Months on Coronavirus Impacts, IHS Markit Says

Engineering and Construction Materials Prices Fall for First Time in 40 Months on Coronavirus Impacts, IHS Markit Says

March 25, 2020



NEW YORK (March 25, 2020) – 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.

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.

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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.

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