Although ENR’s cost indexes measure the costs of nonresidential buildings, the downturn in the housing market still has a major impact on index movement. During this quarter, lumber prices in the indexes were down another 1.8%, after dropping 23% over the previous four years. Falling lumber prices had been offset by surging steel prices. However, the current recession has sent steel prices tumbling. As a result, the Building Cost Index (BCI) fell 1.8% this quarter, pulling the year-to-year escalation down from 7.3% last fall to 4.3% this month. The Construction Cost Index (CCI) is less affected by these swings in material prices The mechanics of what drives ENR’s indexes are explained below.
ENR began systematically reporting materials prices and wages in 1909, but it did not establish the CCI until 1921. The index was designed as a general-purpose tool to chart basic cost trends. It remains today as a weighted aggregate index of the prices of constant quantities of structural steel, portland cement, lumber and common labor. This package of goods was valued at $100 using 1913 prices.