IHS MARKIT LTD. COVID-19 Omicron variant, energy crises driving volatile materials prices and construction labor shortages
January 26, 2022
WASHINGTON, D.C. (January 26, 2021) - Engineering and construction costs rose for the fifteenth consecutive month in January, according to IHS Markit (NYSE: INFO) and the Procurement Executive Group (PEG). The headline IHS Markit PEG Engineering and Construction Cost Index recorded an index score of 75.8 in January, up from 75.2 in December. The subcontractor labor index rose another 5.3 index points to 84.2 in January while the sub-index for materials and equipment costs declined 1.4 index points to 72.3.
Shipping rates continued their streak of price increases, recording their twenty-first consecutive gain in January. The sub-index for copper-based wire and cable prices also rose, from 62.5 in December to 73.3 in January. The electrical equipment sub-index dropped from a sub-index reading of 86.4 in December to 78.6 in January, though this total remains in expansion mode, indicating respondents are observing increasing prices.
"Surging Omicron case counts along with the twin energy crises in Europe and mainland China are continuing to disrupt supply chains, creating volatile pricing and exacerbating labor shortages in the U.S. and Canada," said John Mothersole, pricing and purchasing director, IHS Markit. "Moves in the IHS Markit Materials Price Index (MPI) capture this recent strength in commodity markets, with the index up a cumulative 10.3 percent between late November 2021 and early January. However, notwithstanding this early winter uptick, commodity prices in January are collectively 10.7 percent lower than the peak seen in May 2021. Improving logistics services will hasten the commodity price correction, benefitting downstream goods and year-on-year inflation rates are expected to slow by the end of 2022."
The sub-index for current subcontractor labor costs came in at 84.2 in January, another noticeable increase from December's index figure of 78.9. According to survey responses, labor costs continued to rise in all regions of the United States and Canada.
The six-month headline expectations for future construction costs index increased to 69.4 in January, as respondents still expect prices to continue increasing through the middle of 2022. The six-month expectations index for materials and equipment came in at 59.0, 4.8 index points higher than in December. The six-month expectations index for sub-contractor labor rose 16.9 index points this month to 93.9, indicating respondents once again expect labor costs will increase robustly in all regions of the United States and Canada.
Survey respondents reported shortages for some materials again this month, but also mentioned logistical disruptions due to winter weather. Proposal activity remains steady, as the index stayed at 75.0 in January, the same level as in December.
To learn more about the IHS Markit PEG Engineering and Construction Cost Index or to obtain the latest published insight, please click here.
About IHS Markit (www.ihsmarkit.com)
IHS Markit (NYSE: INFO) is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 business and government customers, including 80 percent of the Fortune Global 500 and the world's leading financial institutions. Headquartered in London, IHS Markit is committed to sustainable, profitable growth.
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IHS Markit Ltd. published this content on 26 January 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 January 2022 15:06:09 UTC.
