Heavy-equipment costs are rising this year due to increasing demand and higher prices for raw materials, such as engines, fuel and rubber. U.S. diesel fuel prices shot up to nearly $4 per gallon in early April, an 32% annual increase, according to the U.S. Energy Information Administration. Yokohama Tire Corp. cites rubber cost inflation for its coming 10% price hike for off-road tires. Overall prices for new construction machinery in February increased 2% over the same month last year, according to the Bureau of Labor Statistics, while monthly prices for used equipment sold at auctions shot up dramatically over prior
At a seasonally adjusted annual rate of $404.9 billion, new construction starts in February fell 4% from the previous month, according to McGraw-Hill Construction. On a year-to-date basis, total construction starts during the first two months of this year were 9% below the first two months of 2010. That 9% decline includes a 21% drop in nonresidential buildings. However, that decline is skewed by comparison to 2010’s data, which included two massive projects totalling more than $4 billion.
The three index tables on this page each represent various components of ENR’s two primary indexes. The Materials Price Index is the materials component of both ENR’s cost indexes. The Common Labor Index is the labor component of ENR’s Construction Cost Index, and the Skilled Labor Index is the labor component of ENR’s Building Cost Index. Related Links: Economics: Japan Quake Won�t Shake Up Costs as Recession Trumps Rising Prices Confidence Survey: Top Industry Execs Believe the Market Has Turned a Corner Bidding: Price Escalations May Lead Aggressive Bidders To Default Asphalt: Weak Demand vs High Oil Prices Executive Compensation:
Although ENR’s cost indexes measure the costs of non-residential buildings, the stalled recovery in the housing market still had a major impact on index movement. After falling 27% over the previous five years, lumber prices spiked in the first quarter of last year as federal tax credits boosted the depressed housing market. But lumber prices faded as the housing recovery stalled, ending the first quarter of this year about 4% above 2010’s level. In addition, steel prices also spiked in 2010. Related Links: Economics: Japan Quake Won�t Shake Up Costs as Recession Trumps Rising Prices Confidence Survey: Top Industry Execs
Rising materials prices coupled with aggressive bidding in a down economy have raised concerns that a new wave of contractor defaults may be on the horizon. While the contracting community proved more resilient during the downturn than some had predicted, many firms that bid aggressively in recent months and slashed profit margins face considerable hardships as prices for materials and consumables continue to rise. Related Links: Economics: Japan Quake Won�t Shake Up Costs as Recession Trumps Rising Prices Confidence Survey: Top Industry Execs Believe the Market Has Turned a Corner Asphalt: Weak Demand vs High Oil Prices Executive Compensation: Companies
Asphalt prices, which had largely flat-lined in the last 12 months, were shocked back to life in March by a run-up in oil prices fueled by the recent political turmoil in the Middle East. Highway contractors are guessing at whether hard-to-predict asphalt prices will continue to follow oil in upcoming months, something that doesn’t always happen. Source: Spot Rpice Brent Blend. IHS Global Insight. Source: Producer Price Index Bureau of Labor Statistics. IHS Global Insight. Related Links: Economics: Japan Quake Won�t Shake Up Costs as Recession Trumps Rising Prices Confidence Survey: Top Industry Execs Believe the Market Has Turned a
The seeming boundless optimism of the construction industry has been sorely tested over the past two and a half years. The market recession that hit nearly every market in every region of the U.S. has cast a pall over the industry, which has seen projects and opportunities dry up, firms large and small fall by the wayside and unemployment rates in the trades of over 20%. The mantra for recovery has been “Wait till next year.” But amid this gloom, a new sense of hope is beginning to appear in the industry, according to the most recent ENR Construction Industry
Readers of ENR generate a steady stream of questions about the magazine’s indexes and how to accurately apply them to construction projects. To help clarify the nature and use of the cost indexes, here are answers to the most frequently asked questions as well as suggestions on how to avoid costly mistakes. Related Links: Economics: Japan Quake Won�t Shake Up Costs as Recession Trumps Rising Prices Confidence Survey: Top Industry Execs Believe the Market Has Turned a Corner Bidding: Price Escalations May Lead Aggressive Bidders To Default Asphalt: Weak Demand vs High Oil Prices Executive Compensation: Companies Seeking �Game Changers�
Despite the headline-grabbing attention of federal deficits and budget cuts, the real problems facing construction remain the prolonged recession in the private nonresidential building markets, the weakening of the once-dependable public markets, a stalled housing recovery teetering on the brink of slipping back into recession and high unemployment. That does not add up to a quick recovery, which in turns equals low inflation abetted by desperate bidding. The sudden turnaround from the Keynesian economics of stimulus to the Hoover-era economics of austerity only make the outlook bleaker. Related Links: Confidence Survey: Top Industry Execs Believe the Market Has Turned a
With optimism surrounding a market upswing, contractors seem to be willing to offer higher compensation to talented top-level executives as a strategic way to adapt to new markets and draw in new business. Related Links: Economics: Japan Quake Won�t Shake Up Costs as Recession Trumps Rising Prices Confidence Survey: Top Industry Execs Believe the Market Has Turned a Corner Bidding: Price Escalations May Lead Aggressive Bidders To Default Asphalt: Weak Demand vs High Oil Prices Internet: Finding Cost Data on ENR.com: Cost Indexes, Wages and Prices Methodology: As the Construction Recovery Stalls, What Is the Impact on Inflation? Indexes: How
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