WASHINGTON, D.C. (April 28, 2021) – The headline IHS Markit PEG Engineering and Construction Cost Index fell to 72.4 in April, according to IHS Markit (NYSE: INFO) and the Procurement Executives Group (PEG). While engineering and construction costs increased for the sixth consecutive month, the index recorded a 7.0 point decline from the March figure, indicating price increases were not as widespread in April. The materials and equipment portion of the index marked its fifth straight month of reported price increases, though fell to 78.5, a 4.8 index point decrease from March. The subcontractor labor index came in at 58.3, 12.2 index points lower than March’s reading.
Survey participants’ responses indicated increases for all categories under the materials and equipment sub-index for the fourth month in a row in April. Costs of ocean freight from both Europe and Asia to the United States rose for the eighth consecutive month, reaching a total of 95.0, an increase of 6.1 index points from March. Most other categories experienced declines in index totals from March to April, indicating price increases were not felt as widely this month. Transformer prices recorded their fifth straight month of price increases, though fell from a sub-index reading of 77.3 in March to 72.7 in April. Copper prices increased for the ninth month in a row, with an index figure of 78.6 in April, down from 91.7 in March. The alloy steel pipe price index bucked this trend, rising to 84.6 in April, an increase of 1.3 points from March.
“Steel pipe prices will continue to rise throughout the second quarter, reflecting strength in buying activity as well as surging steel input costs,” said Amanda Eglinton, associate director, IHS Markit. “The extent of the price increases will vary significantly across products and geographies, with increases in the United States exceeding those in most other economies. The strong increases in input costs mean that suppliers are still seeing their margins squeezed despite increasing prices to buyers, providing little room for negotiation on buys.”
The sub-index for current subcontractor labor costs came in at 58.3 in April, significantly lower than March’s index figure of 70.5, though still in expansion territory. According to survey responses, labor costs rose in all regions of the United States and in Canada. However, the sub-indexes in all reporting regions totaled much lower than in March, signaling cost pressures were less widespread than a month earlier.
The six-month headline expectations for future construction costs index totaled 77.8 in April, indicating respondents’ expectations of continued price increases through the second and third quarters of this year. Both sub-indexes reflected this sentiment, with the materials and equipment sub-index totaling 79.2 this month. The six-month expectations index for sub-contractor labor recorded an index reading of 74.4 in April, as labor costs are expected to continue increasing in all regions of the United States and Canada.
Most survey respondents did not report any shortages for materials and equipment, other than some transient supply constraints due to shipping.
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