FORECAST: Inflation in 2005 Will Fall Back to 3.5%
An unexpected surge in material prices took ENRs cost indexes on a wild ride this year. Steel prices started rising early in the year and quickly reached record highs. This was followed by steep increases in lumber prices during the first half of the year. Even the long docile cement prices started to succumb to regional shortages during the summer, leading to the largest price hikes for cement in over a decade. By December, these higher prices had pushed the materials component of ENRs indexes 20% higher than a year ago.
ENRs Building Cost Index was affected the most by the spike in prices, ending the year 9.7% higher than 2003. The Construction Cost Index posted a 7.8% annual increase. ENR believes the impact from higher material prices on industry inflation has played out and by December of next year inflation will ease back to its former pace. ENR is forecasting a 3.6% increase for the BCI and a 3.5% increase in the CCI in 2005.