Mixed Pricing Trends in S&P Global Market Intelligence & PEG Construction Cost Study

Engineering and construction costs continued to show gains in August, according to the Engineering and Construction Cost Indicator from the Procurement Executives Group and S&P Global Market Intelligence. The headline Engineering and Construction Cost Indicator, a leading indicator measuring wage and material inflation for the engineering, procurement and construction sector, saw a net decline to 63 points this month, but remains elevated. The sub-indicator for materials and equipment costs increased by 0.9-points to 60.7 points while the sub-indicator for subcontractor labor costs decreased to 68.5 points in August from 73.3 points in July.

The materials and equipment indicator stabilized in August following three consecutive monthly declines. Six of the 12 components declined compared to last month, though this was offset by increases in three components, alongside three that remained unchanged. Most of the decreases seen in August were relatively modest compared to the increases seen in July.

Copper-based wire and cable saw the largest pullback, decreasing 8.3-points. This was followed by a decrease of 6.9-points seen from turbines. These declines were accompanied by milder decreases seen from redi-mix concrete, carbon steel pipe, alloy steel pipe and shell and tube heat exchangers. However, these declines were offset by a smaller grouping of upward pressure found in transformers and electrical equipment, increasing by 13.9-points and 8.3-points, respectively. Additional gains were seen from fabricated structural steel, increasing by 3.9-points.

Electrical equipment in general and transformers in particular continue to struggle with lingering supply chain shortages that have come to define the category,” said Maxwell Clarke, principal economist, S&P Global Market Intelligence, in the press release. “Longer lead times predate category concerns that have also shifted towards tariff policy. However, no real improvement in conditions will be possible until electrical steel availability improves.”

The sub-indicator for current subcontractor labor costs experienced a further pullback in August, decreasing to 68.5 points after a reading of 73.3 points last month. Despite gains registered in the U.S. Northeast, widespread decreases were seen in the U.S. Midwest, South and West regions, alongside no change in both eastern and western Canada.

The six-month headline expectations for future construction costs indicators stabilized to 75.1 in August. The six-month expectations indicator for materials and equipment came in at 76.2, which is 2.7-points higher than last month’s figure. Seven of the 12 categories saw increases in August, led by an 11.6-point increase from redi-mix concrete to 68.8 points and an 8.9-point increase from turbines to 87.5 points. Providing the greatest source of downward pressure were 7.8-point decreases from fabricated structural steel to 78 points and shell and tube heat exchangers to 70 points.

Meanwhile, the six-month expectations indicator for subcontractor labor saw mixed results in August. Further gains were again seen out of the U.S. Northeast. However, this was contrasted by registered declines in the U.S. South and West, alongside an unchanged reading from the U.S. Midwest. Unchanged readings were also recorded for both the Eastern and Western regions of Canada. On balance, despite the overall decrease, the overall sub-contractor labor outlook reading remained very high at 72.2 points in August.

Respondents reported few shortages this month, again largely confined to electrical equipment categories. Market commentary continued to note general uncertainties related to tariff policy.