After suffering through three years of strong price escalation, contractors appeared to be getting a break in 2007. Construction inflation tracked by the industry’s major general purpose cost indexes, which measure labor and materials costs, eased from 6% a year ago to 4% this quarter. Indexes measuring selling costs saw average annual escalation fall from 10% in the second quarter of last year to 8%. Such relief may be short lived as estimators say they are bracing for another round of material price escalation.
After easing from record levels, steel prices are starting to rebound again, says Karl Almstead, who is responsible for putting together the Turner Construction Co.’s cost index. That index saw year-to-year escalation decline from 12% last year to 8% this quarter. “Steel and rebar prices are rebounding after coming off of record levels,” says Almstead. He expects the rebound to take some prices past their previous peak, noting that steel prices already increased between 4% and 8% during the second quarter.