PPI « Construction Analytics

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Comprehensive Construction Inflation 2025 text and graphics post on this blog Construction Inflation 2025 PPI updated 5-15

Construction Briefs May 2025

May 5, 2025 5:07 pm / Leave a comment

For the 9th consecutive year, I will be speaking at Advancing Preconstruction. I will be opening the program May 22 to the plenary session with a summary of the current and expected economic conditions affecting everyone involved in construction, all geared towards one word, RISK.

Construction Spending Q1’25 vs Q4’24 notable Q/Q increases: Education, Healthcare, Amusement/Recreation and Communication are all up 2% to 3%. Highway is up+4.9%, Data Centers +5.4%, Warehouse +7.5% and Lodging +8.3%.

Construction Spending for March is down 0.5% from Feb, but that’s because Feb was revised UP by 0.5%. Jan also revised up 0.66%. YTD Total vs Jan-Mar 2024 is up 2.8% YTD. Data Centers vs Jan-Mar 2024 is up 40%.

Construction Spending Q1’25 vs Q4’24 is UP in every category except Residential, Commercial/Retail w/o Warehouse and Manufacturing (Mnfg was expected). Residential and Comm/Rtl are down only a slight 0.2% and 0.4%. Manufacturing is down 4.7% Q1vQ4. This is the beginning of the Manufacturing spending taper as early projects come to an end. I described that taper here. The Manufacturing Spending Taper

Not seeing any major indications in spending due to tariffs yet. Still early in the data (thru Mar) for that.

Construction Jobs increased 11,000 in April. However, hours worked dropped by 0.6%. Total workforce hours worked declined by an equivalent of 50,000 jobs. Jobs are now at 8,316,000, an all-time high. Jobs are up 27k year-to-date, the slowest growth for the 1st 4 months since 2012 (excld 2020). Although hours worked fell in April, total workforce hours worked increased 2.1% over same 4mo 2024. Average yr/yr growth for Jan-Apr hours worked is 3.7% for the last 10 yrs (ex 2020).

J P Morgan expects imports from China to fall 75%-80% in the 2nd half of the year. Total all imports from all sources are expected down 20%. Some products are going to become unavailable.

The U.S. imports about 30 million metric tons, about 30% of total steel used, of all types of steel annually. The U.S. imports about 6 million metric tons of steel pipe annually. Approx 2/3rds of steel pipe used annually in the U.S. is imported. If the U.S. loses its imports of steel pipe, we can’t support as many building projects. Pipe here refers to pipe and tube. That includes things like gas and oil pipelines, water pipe, steel conduit and structural square/rectangular tube sections (Trump’s Wall).

What’s frustrating this week is all the latest construction spending and jobs data just came out, and everyone wants to know, What’s the impact on the forecast?, and none of the data reflects tariff impacts or potential slowdowns. Spending is thru Mar31 and jobs are thru Apr12. Some of the inflation data is 1 to 2 quarters behind.

I am expecting, when I prepare the Midyear Forecast, that spending projections will go down, perhaps 1% to 3%, and inflation projections will go up. Currently, I’m carrying inflation between 4%-5%. Owner’s may slow or even cancel capital expenditures and material prices are broadly expected to increase.

When PPI data is released May12, that will be thru April. But remember, PPI data is domestic products only. So any inflation in the PPI data is domestic suppliers adjusting pricing to reflect pricing similar to expected increases to match imports. We might begin to see our first clues of tariff impacts/demand when the next construction starts data gets released around the end of May. How much in previous starts have been canceled/delayed? We already know of some chip plants and data centers canceled/delayed.

Construction – What to Watch: Cost to build going up; Cost to finance is up; Product availability in question; Product delivery schedule delays; Margins pressured; Small/Midsize firms squeezed; Labor let go/disappearing; Projects in planning, delayed; Project ROI not met; Projects planned, canceled.

I recommended (going back 6 yrs ago, but still relevant today) that every construction cost estimator is going to need to identify in every estimate/budget presented to an owner for every upcoming project, all items subject to price revision due to tariff. If you don’t you stand to lose your already meager profits.

I can’t even begin to know what to tell construction cost estimators to carry in budgets for increased cost due to tariffs and supply issues. Best I could suggest at this time is to carry an agreed allowance (IMO, better than contingencies), which can be visited at a later date and adjusted to actual cost. ‪Contingencies are for unknown, unexpected, unidentified issues. Allowances are described in the basis of estimate for identified cost issues, but at unknown cost amounts. All allowances in any estimate/budget should be identified at conception with intent to revisit at later date to adjust to actual cost. (The most common allowance you may be familiar with is a rock allowance). Identify allowances up front and reach agreement on budgeted cost with all parties. This will make your contract administration go a lot smoother than trying to negotiate how much of the contingency you can use for a cost increase that was foreseen. The only unforeseen here is actual cost.

ABI – DMI – CBI Leading Construction Indicators

With exception of residential, which has short durations and for which backlog is always only about 30%-35% of previous yr revenues, for all other work, never (since 2010) was backlog shown to be less than the previous yr spending. https://edzarenski.com/2021/05/01/abi-dmi-cbi-leading-indicators/

Construction Backlog, all work under contract yet to be put-in-place, usually extends out 2 to 3 years. Backlog changes only IF new starts are greater than spending in the month, backlog goes UP. If new starts are less than spending, backlog goes DOWN. Subtract canceled projects from starts causes backlog to go down, but delays are are just moved out in time, so are still in backlog.

PPI INPUTS Q1 vs avg 2024: to Nonres Bldgs +0.9%, to Residential +1.15%, to Highway +1.0%. All these being near 1% for Q1, if growth is constant, would be near 4% for the year. Big IF! Paving mixtures +11% in Q1, Lumber Plywood +4.5%, Fab Str Steel +0.03%, Fab Str Stl Bridges -1.1%, #2 Diesel Fuel -9.6%, Steel Pipe and Tube -3.85%, Nonferrous Wire and Cable +1.8%, Copper and Brass Mill Shapes +4.7%, Aluminum Mill Shapes +7.5%.

PPI Final Demand 1st 3mo vs avg 2024: Avg Nonres Bldgs +1.3%, Educational +1.6%, Healthcare +2.7%, Roofing Contractor + 2.8%, Avg 4 trades +1.7%. Your monthly reminder, although this index is posted monthly, it is corrected quarterly. April data is the correction month for Q1.

New home construction costs have risen about 3% in the last year, from lumber down 4% to concrete up 6%, per JBREC. The US Census Constant Value Rsdn Index is up 3.5% for the 1st 3 months 2025.

The Biden admin supported the construction $200 billion in new manufacturing facilities that began in 2022 and is now tapering down. It will take a lot of jobs to fill those facilities. But will jobs grow in the current economic environment?

Just about anything that can be considered a leading indicator is pointing down. Layoffs, container ship projected offloads are down and falling, China cut shipping to US, supply chains disrupted, immigrant fears affecting labor. Expect costs up, workload down, labor tight.

I’ve been asked, Why don’t you use AI to develop economic analysis? Artificial Intelligence sometimes gets analysis really wrong. There is some percentage (40%?, 60%?) of end results that AI creates that is literally just made up. If you were to use AI to develop forecasts and analysis of construction data, without having a thorough knowledge of the data and an ability to recognize when it’s meaningful, or garbage, then how would you know when AI is right or wrong. Understand your data well enough to know when your analysis makes sense. For my part, I’d rather spend my time understanding the data and the analysis then to spend it verifying if AI is producing realistic and meaningful output.

Summer is just around the corner. The Hummingbirds returned last week.

Construction Forecast Update May 2025

Construction Briefs Apr 2025

April 3, 2025 9:23 am / Leave a comment

Tariff actions are not yet reflected in Feb PPI Inputs or PPI Final Demand index. Still early. Also remember, PPI does not include imports or tariffs on imports. When we do see movement in the PPI, it reflects domestic pricing decisions following on tariffs.

Lutnick: “Foreign goods may become a little more expensive, but domestic goods do not.” FALSE see next par.

PPI Excludes Imports/Tariffs. The 2018 steel tariffs of +25% applied on imported steel. However the 2018 PPI data shows that the cost of ALL DOMESTIC steel mill products (of all types) produced in the US increased 18% in 2018, after the steel tariffs were imposed.

If tariffs, for example, affect only 10% or 20% of products used in the industry, then the PPI shows us the domestic producers reaction to tariffs, which gets applied to the other 80% to 90% of product. For instance all steel is not imported, so not all steel will experience a tariff. The point here is that tariffs impact pricing decisions on all domestically produced products, not just the imported products. Consumers pay the price.

Impacts on Construction Inflation and Spending (guesstimates).

2021 inflation was 8%-14%. 2022 it was 12%-17%. Could 2025 repeat 2022? Yes. Will it? ??? I guess it hits 6%-10%.

I’m guessing some projects contributing to 2025 spending will be canceled/postponed. So maybe spending drops 5% from here, to zero growth. Construction spending annual growth is normally in the range 4% to 10%. 2025 and 2026 were both forecast at 5% to 7%. No doubt some projects will be canceled or mothballed. So the next 3 yrs spending gets reduced, and cost gets increased.

I’m beginning to think one of the first issues we have to deal with is supply shortages. All types of imported products are not going to be available, and there aren’t enough domestic products to replace them. This will add delays and cost to building projects.

Yeears ago, when I was a construction cost estimator, a major client would run numbers on a proposed new building project. If it couldn’t balance a ROI in 7 yrs, project would not move forward. As cost to build increases, it becomes harder to hit ROI. This supports that some projects may be canceled or postponed.

Construction – What to Watch
Cost to build going up
Cost to finance is up
Product availability in question
Product delivery schedule delays
Margins pressured
Small/Midsize firms squeezed
Labor let go/disappearing
Projects in planning, delayed
Project ROI not met
Projects planned, canceled

Virginia has the largest concentration of Data Centers in the U.S. Virginia is projecting energy shortages due to the extreme demand DCs put on power grids. If you don’t build out the energy grid, the data centers put too great a demand on the current grid. “There are six states in the United States where data centres already consume over 10% of the electricity supply, with Virginia leading at 25%.” https://www.iea.org/reports/energy-and-ai/understanding-the-energy-ai-nexus

In the Q1 pre-tariff outlook, Data Center spending (SAAR), began the year 16% above the avg of 2024, is steadily climbing at 1.5% to 2%/mo., and sometimes more, is now up 22% vs avg 2024. By midyear the rate of spending will be up 28%. Data Center spending increased 45% in 2023 and 56% in 2024. Forecast for 2025 +37%. Obviously, this could get reduced if/when some projects get canceled.

The New Albany (Ohio) project, projected worth $1bil, is one of the two announced DC projects that have been halted https://www.nbc4i.com/news/local-news/licking-county/microsoft-pulls-out-of-licking-county-projects/

What if: A 10%/yr reduction in forecast new Data Center starts in 2025 and 2026 would result in reduced Data Center construction spending by -3% in 2025, -7% in 2026, -7% in 2027 and -3% in 2028.

What if: A 10%/yr reduction in forecast new Data Center starts in 2025 and 2026, combined with a 10% cancelation of 2024 starts, would result in reduced Data Center construction spending by -8% in 2025, -10% in 2026, -8% in 2027 and -3% in 2028. A 10% drop in Data Center spending is $4bil/yr.

It is not clear if the two halted projects mentioned in the article above were already committed construction starts or future proposed starts.

The Fed Chair just said what every credible economist, every economics textbook, and every empirical study shows: Tariffs reduce output and raise prices. – Justin Wolfers, Econ professor at Michigan, Senior fellow, Brookings and PIIE.

Let’s not forget what initiated growth in new manufacturing facilities. New manufacturing building contract starts over the last 3yrs is just over $600bil. Normal starts without government investment would be about $300bil over 3yrs. About $100bil of spending growth over the 3 years is inflation, leaving the remainder of about $200bil in spending growth attributed to government investment. All that began, and most of it got spent, under the previous administration. https://www.forbes.com/sites/courtneyfingar/2024/12/12/manufacturing-jobs-boom-arrives-too-late-for-biden-to-benefit/

Whenever we get an unusually large increase in new construction starts and spending, the tapering off of those projects leads to a decline on the tail end. Mnfg new starts peaked in 2022-2023. We are entering the period of the manufacturing construction spending taper. Mnfg spending has fallen slightly in 4 of the last 5 months. The forecast for 2025 is down -10%.

Microsoft has announced a pullback in spending on new Data Centers. Reduced demand negates need for new facilities, kills expansion plans, lowers new construction forecast, decreases jobs growth in construction. Mothball if partially built factory, not only expensive for owner, but also negative impact to contractor’s forecast revenues.

Whenever there’s a devastating natural disaster, causing destruction to homes, property and infrastructure, the supply of contractors, laborers and materials stays the same while demand skyrockets from victims trying to rebuild. Contractors generally pick more profitable projects over less lucrative ones.

In the Construction Analytics Outlook Feb 2025 report I said, “Don’t be surprised if 2025 construction jobs growth slows a bit. Jobs are slightly ahead of volume growth, particularly in the Non-building Infrastructure sector.”

Construction gained 19k (+0.2%) jobs in Feb, BUT total hours worked declined 0.3%. Total jobs have increased but Hrs worked has gone down the last 5 months. We’ve posted minor jobs gains in both Jan and Feb, and yet unemployment has gone up from 5.2% in Dec to 7.2% in Feb.

The March jobs report shows only minor gains in the # of jobs. We’ve added only 24,000 new jobs in the 1st quarter, the slowest 1st qtr jobs growth in 13 years (except for 2020, Covid). But hours worked in March increased by 1.5%. That acts on the entire 8.3 million workforce and is equivalent to adding 128,000 more jobs.

The jobs numbers reported April 4th cover the period from Feb15-Mar15. There are not yet any impacts from tariffs reflected in the jobs numbers.

We may see the term “force majeure” come up a lot in the near future. And if construction contracts don’t have a force majeure clause, there may be a lot of contractors in trouble.

My guess is if the people of Greenland take a vote to Join the United States, it would be 99-1 No. Of course, they would say “No, thank you.” As they so eloquently put it, “We’re not assholes.”

Tariffs Create Unknown Costs to Construction

Construction Briefs May 2025

Construction Inflation & PPI 2025 updated 10-17-25

February 21, 2025 3:25 pm / 1 Comment on Construction Inflation & PPI 2025 updated 10-17-25

11-13-25 See new post Construction Inflation 2025 Update Nov. for all new index tables and plots update dates vary from July, Aug to Q3.

10-17-25 Residential Index reduced and minor reduction in Nonres Bldgs Index, see notes in Construction Analytics Building Cost Indices and Reference Indices. The tables and plots included data only thru July.

9-3-25 Updated PPI tables and plots to JULY data issued 8-15-25.

5-15-25 all ppi DATA UPDATED TO APR

2-21-25 All new data updated to Q4. A major change with this new data / plots, is the change in the base date from 2019 to 2024. These index tables / data cannot be mixed with prior issues. Now using base 2024 = 100 in all data / plots included here. Percents yr/yr or mo/mo don’t change, the indexes change.

To properly adjust the cost of construction over time you must use an Actual Final Cost Inflation Index, otherwise called a selling price index. General construction cost indices and Input price indices that don’t track whole building final cost do not capture the full cost of escalation in construction projects.

Spending Must Be Adjusted by Inflation

Usually, construction budgets are prepared from known “current” costs. If a budget is being developed for a project whose midpoint of construction costs is two years in the future, you must carry in your budget an appropriate inflation factor to represent the expected cost of the building at that time. Why the midpoint? Because half the project cost occurs prior to that point and half occurs later than that. Actually, the midpoint of spending is 50-60% into the schedule, but the calculation to the midpoint of schedule is close. So, the average inflation for the project includes early contracts that have less inflation than average and also later contracts that would have more than the average inflation. Construction inflation should always be calculated from current cost to midpoint of construction, or in the case of using historical data and converting an older actual cost to a future budget, from midpoint to midpoint.

Any time a construction project is delayed or put on hold to start at some future date, construction cost inflation must be calculated and added to the previous budget to account for the unanticipated cost increase due to the delay. Of utmost importance is using appropriate cost indices and forecasting future cost growth to account for the difference in original budget and revised budget.

Besides the estimator’s need to accurately reflect future expected cost, inflation is an important aspect of the company business plan. Typically discussed in tandem with spending, inflation has an impact on tracking and forecasting company growth. All spending includes inflation, but inflation adds nothing except $ signs to the overall growth. For example, in a year when company revenues (spending) increase by 10%, if inflation is 6%, then total business growth is only 4%. To accurately calculate growth, and the need for labor to support that growth, spending must be adjusted by the amount of inflation.

Since 2011, Nonres Bldgs inflation is 4.8%, Residential is 5.4% and Non-bldg is 3.9%. But those averages include the unusually high inflation years of 2021 and 2022. Without those two years, since 2011, average inflation for Nonres Bldgs is 3.8%, Residential is 3.8% and Non-bldg is 2.4%.

2025 Inflation Forecast, Nonres Bldgs +4.0%, Residential +4.7% and Non-bldg +4.0%.

5-15-25 2025 Inflation Forecast, Nonres Bldgs +4.4%, Residential +5.0% and Non-bldg +4.3%.

Types of Construction Inflation Indices

General construction cost indices and Input price indices that don’t track whole building final cost do not capture the full cost of inflation on construction projects.

Consumer Price Index (CPI), tracks changes in the prices paid by consumers for a representative basket of goods and services, including food, transportation, medical care, apparel, recreation, housing. The CPI index in not related at all to construction and should not be used to adjust construction pricing.

Producer Price Index (PPI) for Construction Inputs is an example of a commonly referenced construction cost index that does not represent whole building costs. The PPI tracks material cost inputs at the producer level, not prices or bids at the as-built level.

Engineering News Record Building Cost Index (ENRBCI) and RSMeans Cost Index are examples of commonly used indices that DO NOT represent whole building costs yet are widely referenced by construction firms and estimators everywhere to adjust project costs. Neither includes contractor margins.

It should be noted, there are far fewer available resources for residential inflation than for nonresidential inflation.

One of the best predictors of construction inflation is the level of activity in an area. When the activity level is low, contractors are all competing for a smaller amount of work and therefore they may reduce bids. When activity is high, there is a greater opportunity to bid on more work and bids can be higher. The level of activity has a direct impact on inflation.

To properly adjust the total cost of construction over time you must use actual final cost indices, otherwise known as selling price indices.

Selling Price is whole building actual final cost. Selling price indices track the final cost of construction, which includes, in addition to costs of labor and materials and sales/use taxes, general contractor and sub-contractor margins or overhead and profit.

Construction Analytics Building Cost Index, Turner Building Cost Index, Rider Levett Bucknall Cost Index and Mortenson Cost Index are all examples of whole building cost indices that measure final selling price (for nonresidential buildings only).

Residential inflation indices are primarily single-family homes but would also be relevant for low-rise two to three story building types. Hi-rise residential work is more closely related to nonresidential building cost indices.

Producer Price Index (PPI) Final Demand Indices are an example of construction cost indices that represent whole building costs. Final Demand PPI, or Selling Price, represents contractors bid price to client. Includes labor, material, equipment, overhead and profit. Labor includes change in wages and productivity.

PPI Final Demand Indices should not be referenced monthly. These are quarterly indices. Every three months (Jan, Apr, Jul, Oct) BLS performs an update survey to correct the PPI Final Demand indices. For more than two years, in most quarters, about 80% to 90% of the change in the index for the quarter was posted in the update month. In some quarters, growth is flipped from negative to positive. And still in other quarters the correction month doubles or halves the rate of growth. There is no way to determine how much occurred in the update month or a previous month, but the update # along with the two previous months will get too the correct end-of-qtr index.

January is an update month. PPI Final Demand for Jan index basically includes the correction for Nov and Dec. Therefore, the index should NOT be compared mo/mo. There is only one of three months that the index is known for certain to be accurate, the update month. Compare qtr/qtr, but make sure to use the defined months, the correct update month with two previous months. For ex., (Jan+Dec+Nov) / (Oct+Sep+Aug). Those are the defined quarters. (I don’t make the rules).

Refer to National Inflation Indices for comparison to several national selling price indices or various Input indices. National reference indices are useful for comparison. Few firms project index values out past the current year, therefore all future projections in these tables are by Construction Analytics.

Construction Inflation History

Post Great Recession, 2011-2020, average inflation rates:

Nonresidential buildings inflation 10-year average (2011-2020) is 3.7%. In 2020 it dropped to 2.5%, but for the six years 2014-2019 it averaged 4.4%. In 2021 it jumped to 8%, the highest since 2006-2007. In 2022 it hit 12.8%, the highest since 1980-81.

Residential 8-year average inflation for 2013-2020 is 5.0%. In 2020 it was 4.5%. In 2021 it jumped to 14% and then in 2022 reached 15.8%. the highest on record.

30-year average inflation rate for residential and nonresidential buildings is 4.1%. But when excluding deflation in recession years 2008-2010, for nonresidential buildings the long-term average is 4.7% and for residential is 4.9%.

For Non-bldg Infrastructure the 30-year average is 3.6%. When excluding deflation in the recession years 2008-2010, Non-bldg long-term average inflation is 3.9%.

All of these long term averages went up in recent years because instead of including 1991-1994, at 2%/yr, we are now including 2021-2024, at 7%/yr to 8%/yr. All long term and short term inflation rates went up.

Since 2011, Nonres Bldgs inflation is 4.8%, Residential is 5.4% and Non-bldg is 4.3%.

Long-term construction cost inflation is normally about double consumer price index (CPI).
In times of high construction spending growth, nonresidential construction annual inflation averages about 8%. Residential has gone as high as 10%.
Nonresidential buildings inflation (prior to 2021-2022) averaged 3.7% since the recession bottom in 2011. Six-year 2014-2019 average is 4.4%.
Residential buildings inflation (prior to 2021-2022) reached a post-recession high of 8.0% in 2013 but dropped to 3.5% in 2015. It has averaged 5.3% for 8 years 2013-2020.
Although inflation is affected by labor and material costs, a large part of the change in inflation is due to change in contractors’ and suppliers’ margins.
When construction volume increases rapidly, margins increase rapidly.
Deflation is not likely. Only twice in 50 years have we experienced construction cost deflation, the recession years of 2009 and 2010. That was at a time when business volume went down 33% and jobs were down 30%.

Historically, when spending decreases or remains level for the year, inflation rarely (only 10% of the time) climbs above 3%. Avg inflation for all down/flat years is less than 1%. That did hold true in 2020 for both Nonres Bldgs and Non-bldg Infra. It also held true in 2023 for Residential. It did not hold true in 2021 or 2022. In 2021, spending was down for nonresidential buildings and flat for non-building. Inflation for both was over 8%.

Differences in Tracking Period

Be careful when referencing YTD growth. YTD can be the growth so far this year, that is, growth compared to December of the prior year, or it can be YTD currentyr/YTD lastyr. Neither represents the growth from the avg of the previous year, which becomes the historical value. Both are useful during the year to judge trends. The average growth for the year accounts for all the peaks and valleys within each year and and is the value carried forward into the index tables and charts.

Also, use caution when referencing Dec/Dec growth. An example of the difference between Dec/Dec tracking or year over year, and annual average tracking, is Steel Mill Products which was down 28.7% Dec22/Dec21, but the annual average for 2022 is still up 9.0% from the average 2021. In fact, the three years 20-21-22 show Dec/Dec combined inflation is +71%, but the annual averages for those same three years shows total inflation growth of 87%. Annual averages should be used to report inflation.

PPI Excludes Imports and Tariffs

When assessing or tracking the pricing effect of tariffs on construction materials, keep in mind that the Producer Price Index (PPI) does not include imports (imports are not produced in the US), so therefore, does not include tariffs. See items 4 and 24 in the FAQ provided by the Bureau of Labor Statistics. Construction PPI changes reflect pricing decisions domestic producers make on domestic products in reaction to tariffs on imported products. Tariffs have big impact on domestic prices.

BLS explanation of method and definitions

The price change we see in the PPI for construction materials reflects the domestic material prices of ALL other domestically produced materials used in the industry. While tariffs may affect only 10% of products used in the industry, the PPI shows us the domestic producers reaction applied to the other 90%.

For example: The 2018 steel tariffs of +25% applied only on imported steel, affected only 30% (the imported share) of steel used in US. However the PPI shows us that the cost of ALL DOMESTIC steel mill products (of all types) produced in the US increased avg 18% in 2018, after the steel tariffs were imposed. Prices of domestic steel receded somewhat, but the point is that tariffs caused a price increase also in domestic steel. The increase in PPI is domestic producers pricing response in reaction to tariffs. Tariffs impacted pricing decisions on all domestically produced products, not just the imported products. Consumers pay the price.

PPI Construction Materials Inputs Indices

See this post for August PPI update Construction Briefs Sept 2025

ALL PPI DATA TABLES UPDATED TO JUL 8-15-25

ALL PPI DATA UPDATED TO APR 5-15-25 PPI data INPUTS for the month of Apr: Paving Mixtures -9.5%, Steel Mill Products +5.8%, Steel Pipe & Tube +6.3%, Nonferrous Wire +3.7% YTD25/avg24: Concrete Pipe +8.5%, Paving Mixtures -8.5%, Lumber/Plywd +4.9%, Steel Mill Products +3.7%, Nonferrous Wire +3.5%, Diesel -10.8%. PPI data FINAL DEMAND Apr closes out Q1. Q1’25/Q4’24: Avg Nonres Bldgs +0.6%, School +0.4%, Healthcare +2.2% YTD25/avg24: Avg Nonres Bldgs +1.35%, School +1.4%, Office +1.6%, Healthcare +2.91%.

Inputs Table updated 2-15-25 Jan’25 Inputs are up, +0.8% to Nonres, +1.2% to Residential and 1.2% to Highway, the largest increases since Jan’24. The largest Input item increases in January are Paving Mixtures (up 14.6%), Diesel Fuel (up 3.6%), Concrete Brick, Block & Pipe (up 2.2%), Copper & Brass Shapes (up 1.9%) and Flat Glass (up 1%). Steel Pipe & Tube is down 1.3%. Both Lumber/Plywood and Fabricated Structural Steel are down 0.5% or less.

In the quarterly percent change table you can see the drop in Q3’22 and more in Q4’22, a sharp change in the rate of inflation. This shows up as expected in lower average of Inputs to Res and NonRes for 2023.

2-15-25 PPI Materials Inputs for 2024 to Residential are up 1.7%, to Nonres Bldgs are up 0.6% and to Highway are up 0.5%.

In all three of these Inputs PLOTS, the materials plots above and this Summary plot, so far Q1’25 is only Jan. It will wiggle around for 2 more months.

A General construction cost index or Input price index doesn’t track whole building final cost and does not capture the full cost of inflation in construction. Final cost indices represent total actual cost to the owner and are often higher than General indices. Producer Price Index (PPI) INPUTS to construction reflect costs at various stages of material production, generally do not represent final cost of materials to the jobsite and do not include labor, productivity or margins. PPI Final Demand indices include all costs and do represent actual final cost to the Owner.

PPI Construction Final Demand Indices

PPI Final Demand indices should not be referenced monthly. These are quarterly indices. PPI Final Demand Indices are for Nonresidential Bldgs only. Every three months (Jan, Apr, Jul, Oct) BLS performs an update survey to correct the PPI Final Demand indices for the current month and the previous two months. For more than two years, in most quarters, about 80% to 90% of the change in the index for the quarter was posted in the update month. In some quarters, growth is flipped from negative to positive in the update month. And still in other quarters the correction month doubles or halves the rate of growth. January data (released in Feb) is an update month. The PPI Final Demand for Jan. is basically the correction for Nov.+Dec.+Jan. The index should NOT be compared mo/mo. Compare qtr/qtr, but make sure to use the correct update month with two other months, (Nov+Dec+Jan)/(Aug+Sep+Oct).

Due to the nature of the PPI Final Demand Index, (2 monthly readings from model then every 3rd month correction by contractor survey), the correction month for 5 of the last 8 quarters flipped the sign of the modeled months. In 2 of the remain 3 months the correction months more than doubled the rate of change for the previous 2 months. There is no other proof needed to convince you to take care when using this index. Get it right.

2-15-25 The PPI Final Demand table below is updated to JAN 2025 data.

PPI data FINAL DEMAND Apr closes out Q1.

Q1’25/Q4’24: Avg Nonres Bldgs +0.6%, School +0.4%, Healthcare +2.2%.

YTD25/avg24: Avg Nonres Bldgs +1.35%, School +1.4%, Office +1.6%, Healthcare +2.91%

Jan is the correction month for Q4, so the Jan 2025 value closes out the 4th qtr 2024. Most bldg types and contractors are up in the 2nd half 2024 from the 1st half, but cost growth has been nearly flat. If extended, the trend leading into 2025 is for slow inflation growth. However the Roofing trades are increasing at a slightly faster rate than all others.

Due to the nature of the PPI Final Demand Index, (2 monthly readings from model then every 3rd month correction by contractor survey), it is not uncommon that the contractor survey correction month flips the sign of the modeled months for the quarter.

In 2023, for each quarter, we see two months posted positive, then a large negative value for the correction month. The negative correction is large enough in all cases to turn the entire quarter negative. Here’s an example: for the period May-Jun-Jul, Jul is the correction month. PPI values were +0.09%, +0.02%, -1.23%. The average for each of the 3mo is -0.37%, (the sum of the 3 months divided equally. The May and Jun values that were originally posted based on modeling flipped from + to – after the contractor survey value is applied to the QTR. That highlights why PPI Final Demand indices should not be referenced monthly.

However, these declines are from such a high mark at the end of 2022 (we began 2023 up 11%), that the rate as we began 2024 is still up 6% to 7% from the average in 2022.

9-5-25 Q2 Final Demand Index closed out with this July data. Both Table and Plot are updated.

Construction Analytics Building Cost Indices and Reference Indices

2-21-25 Current and predicted Inflation updated to Q4’24

2022 Rsdn Inflation 15.8%, Nonres Bldgs 12.8%, Nonbldg Infra 17.3%
2023 Rsdn Inflation 2.5%, Nonres Bldgs 5.6%, Nonbldg Infra 6.3%
2024 Rsdn Inflation 3.0%, Nonres Bldgs 3.2%, Nonbldg Infra 3.4%

Since 2011, Nonres Bldgs inflation is 4.8%, Residential is 5.4% and Non-bldg is 4.3%.

2-21-2025 Inflation Forecast, Nonres Bldgs +4.0%, Residential +4.7% and Non-bldg +4.0%. (This is a pre-tariff forecast.)

5-15-2025 Inflation Forecast, Nonres Bldgs +4.4%, Residential +5.0% and Non-bldg +4.3%. (This is a preliminary tariff forecast.)

9-3-2025 Inflation Forecast, Nonres Bldgs +4.4%, Residential +4.7% and Non-bldg +4.0%. (This is a preliminary tariff forecast.)

10-17-2025 Inflation Forecast, Nonres Bldgs +4.2%, Residential +3.8% and Non-bldg +4.0%. (This is a preliminary tariff forecast.) These October revisions are NOT yet carried into the tables and plots. Only Residential changed considerably, however, it is the most dependent on government data, which is currently not available. The biggest change is in the Census Bureau Lasperyes Index, a constant quality residential new build index, which now includes August data and both June and July were revised down slightly.

The following Construction Inflation plot (for Nonresidential Buildings only) shows three elements: 1) a solid grey bar reflecting the max and min of the 10 indices I track in my weighted average inflation index, 2) a solid black line indicating the weighted average of those 10 indices, and 3) a dotted red line showing the Engineering News Record Building Cost Index (ENR BCI). Notice the ENR BCI is almost always the lowest, or one of the lowest, indices. ENR BCI, along with R S Means Index, unlike final cost indices, do not include margins or productivity changes and in the case of ENR BCI has very limited materials and labor inputs.

Most of the tables and plots here are cumulative indexes. Construction Inflation annual percents for the three major sectors, Residential, Nonresidential Bldgs and Non-building Infrastructure, are recorded in this short table, Escalation form Prev Year. Useful to compare to last year, but you would need to mathematically do the compounding to move over several years.

Final cost indices represent total actual cost to the owner and are generally higher than general indices. Producer Price Index (PPI) INPUTS to construction reflect costs at various stages of material production, generally do not represent final cost of materials to the jobsite and do not include labor, productivity or margins. Even with that, a PPI Inputs index +20% for a material could be only a +5% final cost. PPI Final Demand indices include all costs and do represent actual final cost. The solid black line (above) represents the Construction Analytics Building Cost Index for Nonresidential Bldgs and is a final cost index.

9-3-25 Although the PPI data was all updated, as of yet it does not have a big effect on inflation. Some slight increase is built into my inflation to account for PPI increasing in the 2nd half. The inflation tables do not yet need an update. Inflation tables will be updated soon.

2-21-25 All index tables and plots updated to Q4’24. NOTE: all prior index tables were set to base year 2019=100. All these updated tables are set to base year 2024=100.

All of the Index Tables and the plot below, Construction Analytics Building Cost Index, show the cumulative inflation index, or the cumulative compounded effect of inflation for any two points in time.

How to use an index: Indexes are used to adjust costs over time for the effects of inflation. An index already compounds annual percent to prevent the error of adding annual percents. To move cost from some point in time to some other point in time, divide Index for year you want to move to by Index for year you want to move cost from, TO/FROM. Costs should be moved from/to midpoint of construction, the centroid of project cost. Indices posted here are at middle of year and can be interpolated between to get any other point in time.

The three yellow highlighted lines in the index tables are plotted here. The three major sectors, Residential, Nonresidential Buildings and Non-building Infrastructure,

This table and plot is an extension of the tables and plots above. Data is as of Q4 2023, but the table covers from 1967 to 2000. Data is pretty sparse.

Non-building Infrastructure Indices

In the Index tables above, dividing the current year by the previous year will give the current year’s inflation rate. All indices are the average rate for the year.

Also, in the tables above, all reference indices data is gathered from the original source, then all are normalized to a common base, 2019 = 100. This allows us to see how different indices compare.

Comparison of Indices

This plot compares four final cost indices and three inputs cost indices. Prior to 2020 there is a lot of symmetry in the final cost group. Everything changed after that.

Previous year Construction Inflation 2024 – last updated JUL 2024 – BASE 2019=100

Links to Data Sources Construction Inflation >>> Links

Outlook 2025 CONSTR OUTLOOK 2025 Feb 2025

Links to Explanations of PPI Index PPI Explanation provided by AGC

Construction – More Thoughts Dec’24

December 13, 2024 1:23 pm / Leave a comment

The PPI data for November released 12-12. Nov PPI for Construction Materials shows very little change from Oct. Inputs YTD to Nonres are +0.6%, to Rsdn +1.7%, to Hiway +0.6%. Concrete products +6%, Steel products -7% to -8%, Lumber/Plywood -2%, Copper +6%, Diesel -14%. Material Inputs will contribute less than 1% to 2024 Inflation (1.7% for Rsdn) as shown in the Final Demand (Nonres) prices. Final Demand YTD (all in cost) to Nonres Bldgs shows all building types up +0.5% or less. Warehouses, and Industrial Bldgs show -0.1% to -0.25%. Concrete, Roofing and HVAC/Plumbing Trades are up +1% to +2%. Electrical trades are down slightly.

The economists watching residential permits and starts number of units are indicating current poor performance and are predicting a gloomy outlook for 2025. So far, the Dodge Construction Network, which tracks dollars starts, has residential starts up 7% year-to-date 2024, when compared to same 10 months 2023. Dodge is forecasting starts up next year. When I spread those starts out over time, the cashflow (spending) is stacking up pretty well at 7%/yr. There could be some downward changes to 2025 forecast due to immigration issues and tariffs.

I’ve been wondering, Should the duct tape be given as much value as the banana? Without the duct tape this whole banana art thing just doesn’t hold up.

PPI Data Sept’24

October 12, 2024 10:07 am / 1 Comment on PPI Data Sept’24

Once again, the Producer Price Index for construction materials is pretty tame with the release of the September data. For Q3, inputs to all types of construction post less than 1% growth for the quarter. This is now 6 or 7 quarters in which Inputs and Final Demand has been near 1% or lower.

Inputs year-to-date vs the 2023 average are up 1.9% for residential and up less than 1% for Nonresidential and Highway.

Individually, a few material inputs had notable moves in September: Lumber/Plywood up 1.1%, Steel Mill Products down 1.2%, Steel Pipe and Tube down 1.3%, Copper and Brass Shapes down 1.1% and Diesel down 14%.

Year-to-date, various concrete items are up 5% to 6%, Steel items are down 6% to 7%, Copper and Brass Shapes are up 6% and Diesel is down 13%.

Final Demand indices for 2024 are barely moving. Although Office and School are both up over 1% for Q3, no building type is up even a half percent when compared to the average of 2023. Roofing Trades are up 1.7% YTD. The average YTD for the four trades is up less than 1%. Over the last six months The only Final Demand indices to move more than 2% (for the full 6mo) were Office Bldgs and Electrical Trades.

Construction Inflation Tame in July PPI

August 15, 2024 3:56 pm / Leave a comment

With the PPI release on Aug 13, for July data, we see both Inputs and Final Demand year-to-date (YTD) tempered considerably. Inputs since December are up only 1% to 2%. Final Demand is up less than 1% YTD.

PPI Inputs averaged for Nonres Bldgs, Residential and Highway, have all been at +1% or lower since Q3 2022. Inputs do not track final cost. No labor or Margins. Inputs can be at very different stages of manufacture and can include a variety of products. For instance Fabricated Structural Steel has been ordered from the mill and includes detailing and fabrication, ready to deliver to the jobsite, whereas Steel Mill Products has not yet been fabricated to any end-user details and in fact includes all types of steel, which would include sheet steel used for manufacture of automobiles and appliances.

Construction Inflation per PPI Final Demand has been at -1% to +1% since Q2 2023. A number of independent firms report Nonres Bldgs inflation at 3% to 4%. I’m tracking at 3.1%.

Turner Index is up 1.9% for the first two quarters of 2024. That is up 3.5% from the average of 2023. RLB is up 2.4% since December and that is up 4.6% from the average of 2023. The U.S. Census New Homes index is up less than 1% since December but that is up 2.8% from the average index in 2023. These are all final cost indices.

Construction Inflation 2024

January 17, 2024 11:37 am / 8 Comments on Construction Inflation 2024

SEE Construction Inflation 2025 – 2-21-25

This post was last updated Jul 2024. All Index Tables and plots here are BASE 2019 = 100. The more recent Inflation 2025 post is revised to BASE 2024 = 100.

To properly adjust the cost of construction over time you must use an Actual Final Cost Inflation Index, otherwise called a selling price index. General construction cost indices and Input price indices that don’t track whole building final cost do not capture the full cost of escalation in construction projects.