Construction Cost Trends—July 2018
BNi Building News
Posted: July 18, 2018 | Cost Trends
BNi Building News Construction Costs July/August 2018
Source: US Department of Labor, Producer Price Index
Construction, while still strong, is not “booming” like before. Still growing at a clip of 4–5% over last year, we are seeing regional declines in the center of the country with continued growth on the coasts. Home prices are continuing to move upward due to short supply than high demand, and we must continue to watch this movement carefully. Commercial construction is doing well with some sectors (but fewer than last year) showing double-digit growth. This may not be the rosiest picture of the last five years, but it’s still good times.
Lumber is the only major product that is still on a tear, with gains in price of 10% this year. All others are flat to down. Even copper, which had substantial gains over the last few years, is down. We are still waiting to see if the upcoming trade wars will affect construction materials. Inflation remains low, although economists continue to hedge their bets. Oil and gas seem to be on a sustained roller coaster ride and are very hard to predict, but right now they are headed up.
Hot Rolled Steel Bar
The price of steel is still on the move, in spite of wild swings in the price of iron ore. One thing that’s helped stabilize steel after the steep declines in 2015 is strong U.S. demand. As long as commercial construction is strong, we should watch for a continued rise in the price of this component in spite of deflating iron ore prices caused by a continued slowdown in Asia.
Concrete Block (CMU)
Over the past few years, we’ve said that the price of CMUs should follow the fortunes of the housing market. New construction in housing is tepid but concrete is on a two-year run of 2% per year. The components of CMUs (sand and cement) are flat so this may be tempering the price.
After three years of strong construction, we were confident that crushed stone would follow the fortunes of commercial and heavy construction. We now see that prediction coming true with increases in the price of stone beginning to mirror those of commercial construction as a whole. Highway/heavy construction is weak and this may have something to do with keeping the price somewhat in check.
After healthy increases in 2016–2017, the price of glass has slowed down a bit. In 2016, glass jumped up 8% over the previous five year average of 1.6% per year. This year it has moderated considerably and is up just 2–3%.
Precast is slowing down. After spiking in Q3 of 2014, precast moderated to gains of just 1–2% for the next two years. In 2017 it jumped 3–4%, but for the past year it slowed down to just 1%.