WASHINGTON DC (February 23, 2022) – Engineering and construction costs rose again in February, posting their sixteenth consecutive monthly increase, according to IHS Markit (NYSE:INFO) and Procurement Executive Group (PEG). The title IHS Markit PEG Engineering and Construction Cost Index recorded an index of 75.3 in February, compared to 75.8 in January, but still well above the 50 mark, indicating a rise in prices. The contractor labor index fell 9.7 index points to 74.5 in February, while the materials and equipment cost sub-index rose 3, 3 index points to settle at 75.6.
February also marks the eighteenth consecutive month of rising shipping costs. Due to these rising shipping costs and limited freight availability, many other component sub-indices have also maintained price increases. The copper-based wire and cable price sub-index rose again, from 73.3 points in January to 79.2 this month. The electrical equipment sub-index also fell from a reading of 78.6 in January to 81.8 in February. The processors sub-index came in at a level of 77.3 in February, although that was down from last December’s peak of 78.6 points.
“The supply of electrical equipment units remains tight, particularly in the North American market, due to prolonged component shortages and high metal input costs,” said David Smith, IHS Markit analyst for machinery and electrical equipment. “One category in particular, transformers, is bearing the brunt of these effects, as manufacturers struggle to acquire tonnage of grain-oriented electrical steel (GOES). GOES steel is in allotment in the United States and is only manufactured in a domestic factory, which has further tightened the supply of domestic transformers.These high input costs, coupled with shipping backlogs, will support price increases for electrical machinery through the end of 2022 . »
The sub-index for current contractor labor costs came in at 74.5 in February, down from January’s index of 84.2. According to survey responses, labor costs have continued to rise in all regions of the United States and Canada.
The overall six-month expectation index for future construction costs fell to 66.0 in February, although the index continues to signal that respondents expect prices to continue rising throughout of summer 2022. The six-month expectation index for materials and equipment fell to 56.2. , 2.8 index points below last month’s figure. The six-month expectation index for contractor labor fell 5.1 index points this month to 88.8, with respondents expecting labor costs are increasing sharply in all regions of the United States and Canada.
Unsurprisingly, the materials reported as missing this month were primarily electrical steel and electrical equipment components.
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