B_0913_CostTrends_Construction

FM Cost Trends: Commercial Construction and Public Spending

Aug. 26, 2013
Commercial Construction on the Rise,
Public Spending Dips

Construction spending has been slowing since the start of the year but the level remains higher than at this time last year. Total spending is up about 8% after last year’s strong finish and a good start in Q1 this year. Private construction leads the way with some sectors showing gains in the double digits (hotels, housing, and offices), while public construction is off 5–7% in most categories. Labor costs are up 1.8% this year. Expect continued overall growth for the rest of this year.

After increases in 2012 of 5%, construction materials have slowed down to increases of 1–2% this year. This is the fourth year of increases after 5 years of declines.

After falling sharply in 2008 and 2009 then rebounding in 2010, hot rolled steel bar registered an increase of 4–5% in 2012. However, prices are again sagging. Rebar is 5% off last year’s level and leads the overall decline in the steel categories.

Last year we said not to look for any increase in the price of concrete masonry block (CMU) until the housing downturn ends. Housing now seems to have turned the corner and concrete block is following. Prices are up 3–5% over last year. Crushed stone has flattened, finally easing its steady upward trend. Lack of public works spending may be having an effect on this component.

The price of glass had been flat but is now showing some signs of increasing. After steady price increases of 3–4% for the previous three years, precast concrete has an increase of just 1% this year.

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Note: All data is based on indices rather than unit or quantity prices.
Source: U.S. Department of Labor, Producer Price Index

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