Engineering and construction costs declined in July after staying flat in June, according to the IHS Markit PEG Engineering and Construction Cost Index. The index fell to 43.4 overall, with the materials and equipment sector reaching 44.8, and the sub-contractor component sitting at 40.2. The index, which is calculated based on survey data from procurement executives in engineering, procurement and construction firms (EPC), indicates falling prices at any figure below 50.
Labor prices rallied in June after construction projects began to reopen but fell again in July. Emily Crowley, associate director at IHS Markit, attributes this trend to new projects being delayed, resulting in workers being laid off as construction is completed rather than moving on to new work.
On the materials side, overall prices fell for the fifth consecutive month, with eight of twelve commodities declining. Among the outliers were ready-mix concrete and ocean freight, as well as copper-based wire and cable, which recorded an increase for the first time since February. Despite the increase, John Mothersole, director at IHS Markit, expects global consumption of copper to fall more than five percent overall in 2020.
Despite the current overall decline, survey respondents expect prices to increase in the near future. Six-month expectations reached 64 on the index, and the materials and labor portions reached 64.8 and 62, respectively.