Methodology: Factors That Drive ENR’s Cost Indexes
The explosion in material prices in 2004 continued unabated through 2005 with double-digit price increases for gypsum wallboard, ductile iron and copper pipe. Petroleum-based products, such as PVC pipe and paving asphalt, also helped keep construction inflation higher than that of the overall economy. Inflation measured by the Building Cost Index (BCI) was 5% last December, after jumping 10% the previous year as the index absorbed a 31% increase in steel prices. Higher material prices also helped push up the annual increase for the Construction Cost Index (CCI) by 5% in 2005. 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 construction goods was valued at $100 using 1913 prices.