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Construction Cost Trends—September 2016

Posted: September 1, 2016 | Cost Trends

Source: US Department of Labor, Producer Price Index

The beat goes on … construction is sustaining 8-10% growth and is one of the stars of our national economy. Housing is still going strong. Commercial construction has had gains in the 10-15% range, with hotels and offices leading the way. All segments of private construction are up, with most public segments following. The latest federal jobs report was strong and this makes it look like we’ll have good times for construction in the near future.

CONSTRUCTION MATERIALS

Little has changed since our last report, but some commodities are showing signs of moving. Watch for possible increases in steel, concrete, and lumber. Nevertheless, overall inflation remains low and economists project at least several more years of flat prices. Copper is continuing to drop, and oil is starting to slide back down to $40 a barrel. So it looks like the uncertainty in material prices will most likely continue. The U.S. is the world economy driver, at the moment, with Europe and China slowly working their way out of current problems.

RUBBER AND RUBBER PRODUCTS

After two flat years in 2012-2013, the price of rubber products increased 2% in both 2014 and 2015. It is now flattening out with no gain in sight this year. It’s still hard for us to tie the price of this material to other commodities. It seems to have no relationship with any other construction material.

SAND AND GRAVEL

After moderating in 2013 with gains of 1-2%, sand and gravel started to climb upward in 2014 with gains of close to 5%. This year it looked like the gains would sustain themselves, but they moderated and now stand at 3%. The highway and public works portion of demand for this material is still soft. The price of fuel is down, but so far, it hasn’t had much impact on sand and gravel.

MILLWORK

We now see millwork prices moderating slightly to 2% (increases in 2013 through 2015 averaged 4%). Following the demands of the housing upturn, along with the increasing price of lumber and an up-tick in commercial construction, millwork had outpaced all of the other construction materials/ components. Now it seems to have fallen back in line with the rest.

CLAY AND CERAMIC

Clay and ceramic products are still moving up, but at a slower rate than last year. They had been flat to down for six years and then moved up for the last two years. They have now settled into an increase of just 1%.

LIMESTONE

Same story, just two years later. After six years of flat prices, limestone moved up with increases of 2-3% in 2013. But since then, limestone has again flattened out and it seems to be developing into an extremely stable component trading in a very tight range. This component doesn’t seem to follow the ups and downs of the industry.

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