IHS Markit PEG Engineering and Construction Cost Index recorded rising costs for the 12th consecutive month in October

WASHINGTON, D.C. (October 27, 2021) – Engineering and construction costs continued to rise in October, according to IHS Markit (NYSE: INFO) and the Procurement Executive Group (PEG). The October 2021 headline IHS Markit PEG Engineering and Construction Cost Index increased 8.6 index points to 74.2 from September, indicating price increases were more widespread in October than the month prior. The sub-index for materials and equipment costs rose to 77.4, while the subcontractor labor index registered at reading of 66.5 this month.

Prices for ocean freight from both Europe and Asia to the United States continued to rise, recording the twelfth consecutive month of increases. The electrical equipment sub-index set a survey high in October of 88.5 as supply chain constraints continue to drive price increases. The carbon steel pipe sub-index is still above 50, signaling prices are still increasing, though increases are becoming less widespread. The steel pipe sub-index totaled 67.6 in October, much lower than the peak level of 90.0 recorded in July.

“Steel pipe production is rising globally as high prices and strengthening demand incentivize mills to increase output. Despite the increases, production remains below optimal levels as mills struggle to find and hire workers and welded pipe producers face shortages of hot-rolled sheet and record-high prices,” said Amanda Eglington, associate director, pricing and purchasing, IHS Markit. “Seamless pipe mills have faced less of a constraint on the availability of raw materials and less cost pressure. Seamless mills are also leading the rebound in manufacturing activity, and in many cases are taking market share from welded pipe suppliers. Prices will remain high but appear near an inflection point as hot-rolled sheet prices start to turn lower in many markets, late in 2021 or early 2022.”

The sub-index for current subcontractor labor costs came in at 66.5 in October, an increase from September’s index figure of 61.0. According to survey responses, labor costs continued to expand in all regions of the United States and Canada.

The six-month headline expectations for future construction costs index equaled 76.6 in October, as respondents still expect prices to continue increasing well into the middle of 2022.

The six-month expectations index for subcontractor labor recorded a reading of 80.3, as respondents expect labor costs to continue to increase all regions of the United States and Canada. Further, this sub-index total is 11.6 index points higher than last month’s reading of 68.7 and marks the 14th consecutive month of readings above 50 for the sub-index.

Most survey respondents did not report any shortages for materials and equipment currently, though respondents still report shortages for ocean vessels. Respondents are also beginning to note shortages for craft and skilled labor, truck drivers in particular.

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