NEW YORK (June 24, 2020) – Engineering and Construction costs fell in June, according to IHS Markit (NYSE: INFO) and the Procurement Executives Group (PEG). The current headline IHS Markit PEG Engineering and Construction Cost Index registered 49.0 in June, falling just short of the neutral mark 50; a neutral index reading indicates responders see no change in pricing. The materials and equipment portion of the index came in at 47.2, still indicating falling prices, while the sub-contractor portion came in at 53.2, signaling rising costs.
Emily Crowley, associate director, Pricing and Purchasing, IHS Markit. “Construction labor markets were facing shortages prior to the economic downturn which will limit any downside correction on wages, though we may see cuts to discretionary bonuses going forward as delays lead to a thinner pipeline of new projects, taking pressure off of labor demand in the industry.”
The six-month headline expectations for future construction costs rose in June with an index figure of 52.8, recovering from an all-time low last month. Both the materials/equipment and labor subcomponents recorded expectations of future price increases. The six-month materials and equipment expectations index came in at 53.5 this month, up from 39.9 last month, with responders expecting increasing prices for seven out of 12 categories. Expectations for sub-contractor labor registered 51.2 in June. While the U.S. West is expected to see higher labor costs in six months, labor costs are expected to stay flat in the other regions of the U.S. and both regions of Canada.
In the survey comments, respondents continued to note lower demand conditions due to the novel coronavirus (COVID-19).
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