WASHINGTON, D.C. (August 26, 2020) – Engineering and Construction costs fell in August, according to IHS Markit (NYSE: INFO) and the Procurement Executives Group (PEG). The current headline IHS Markit PEG Engineering and Construction Cost Indexregistered 41.8 in August, another drop from July’s figure of 43.4. Both the materials and equipment and the sub-contractor portions of the index came in below 50, indicating falling prices.
John Anton, associate director, IHS Markit. “Not surprisingly, U.S. steel imports have collapsed; moreover, low prices will likely force some restarted furnace capacity to be re-idled. U.S. steel prices will be weak through the end of 2020 but should start to recover in 2021 as supply tightens.”
The sub-index for current subcontractor labor costs came in at 45.2 in August, a slight uptick from July’s 40.2. Labor costs were flat in the U.S. Northeast and Midwest; they fell in the U.S. South and West. Labor costs fell in both Eastern and Western Canada.
The six-month headline expectations for future construction costs index was above the neutral mark again in August, at 56.2, though this month’s reading was down from last month’s reading of 64.0, indicating fewer respondents are expecting cost increases. While the materials/equipment sub-index recorded expectations of future price increases, the labor sub-index recorded falling costs. The six-month materials and equipment expectations index came in at 59.2 this month, down from 64.8 last month, with responders expecting increasing prices for nine out of 12 categories. Prices for several downstream products such as exchangers, transformers and electrical equipment are expected to fall. Expectations for sub-contractor labor registered 49.2 in August, dropping from 62.0 in July. Labor costs are expected to fall in both Eastern and Western Canada. For the United States, labor costs are expected to rise in the South, stay flat in Northeast and West and fall in Midwest.
In the survey comments, respondents continued to note lower demand conditions due to the novel coronavirus (COVID-19) and no shortages for most categories.
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