Costs fall in North America

09 November 2016

Construction costs in North America fell for the 22nd month in a row in October, according to IHS Markit and the Procurement Executives Group (PEG).

The headline current IHS PEG Engineering & Construction Cost Index (ECCI) registered 48.7 this month, up from 48.1 in September. It said both labour and materials sub-indexes recorded soft prices, keeping the headline figure below the neutral mark.

This month, the current materials/equipment price index came in at 48.8. Since April, this sub-index has been oscillating between 47 and 50, which HIS Markit said was a reflection of the volatility in commodity markets.

More than half of the categories in the materials sub-index showed falling prices, with three showing rising prices, while they were unchanged in two categories. Ocean freight from Asia to the US was said to be one of the components that had seen higher index figures in the last two months.

Paul Robinson, principal economist at IHS Pricing & Purchasing, said, “The uptick in current prices and the jump in six-month pricing expectations for ocean freight from Asia reflects a rational concern among customers about rising rates.”

The six-month headline expectations index recorded increasing prices, with the index moving from 51.4 in September to 55.4 in October. The materials/equipment index rose from 52.9 to 56.5 this month, confirming expectations of higher future prices. HIS Markit said nine components showed rising prices, while three were neutral. It added there were no expectations for softer materials prices.

In the survey comments, respondents noted no shortages in supply of materials. Proposal activity has registered an uptick in recent months, but participants remain cautious, said HIS Markit.

The IHS PEG ECCI is based on data independently obtained and compiled by IHS from procurement executives representing a number of leading engineering, procurement and construction firms.

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