Construction spending in September increased 14% from the previous year to a seven-year high of $1.1 trillion, according to the Census Bureau. The Producer Price Index (PPI) for inputs to the construction industry fell 1.4% over a three-month period. Several crucial material components have seen significant price declines. Where increases have occurred, they were relatively minor. Overall, material prices appear to be holding steady, meaning the increase in construction spending is a result of building improvements and higher labor costs.
Finding skilled labor to perform increased workloads continues to be the single largest challenge for contractors in today’s market, a fact reflected in rising compensation rates. Nationally, construction wages are growing at a faster rate than other private industry wages. According to a September 2015 report from the U.S. Bureau of Labor Statistics, total compensation in private industry rose 1.8% overall, while total compensation in construction alone rose 2.1% over the same one-year period. We expect this trend to continue.
Looking ahead, our preconstruction specialists predict material prices will remain fairly flat in all regions. We continue to keep a close eye on fuel costs, as fluctuations significantly impact the costs of other material components, and thus, project cost overall. The price of skilled labor will continue to increase, driving up project costs that would otherwise remain relatively flat. Though overall project inflation has been fairly modest at 2-3%, these factors lead our team to forecast escalated inflation of 3-5% for 2016.
If you are planning a project, no matter the size, give Nabholz a call. Our preconstruction teams are ready to advise you on current economic market conditions that might affect your project. We will ensure you get a quality project completed within your budget.