Tuesday, December 23, 2014

Construction Costs Climb at the Fastest Rate Since Early 2008

Oil prices may be falling but that is not necessarily the case for other parts of the US economy.

Building costs are rising at the fastest pace in six years, according to a new report by Rider Levett Bucknall, a property and construction consulting firm.

The firm–which tracks the costs of new commercial, residential and other buildings– said its index of construction costs in the U.S. increased 1.66% between July 1 and Oct. 1, the largest three month increase since early 2008. That's an annualized rate of 7.59%.

The report predicts that construction starts in 2015 will rise about 10%, almost double the estimated growth rate of 2014. “General optimism with the construction sector has continued to rise,” the report says.

At the EPJ Daily Alert, I am spending most of my time warning about the potential for a surprise (to Keynesians) major acceleration in price inflation in 2015.

(via WSJ))

1 comment:

  1. I make my living in the construction industry. I see these current cost increases as part of our bubble economic system (no surprise from an EPJ reader).

    The roaring 2000's housing bubble made for nice profits and high employment in the construction industry. With the inevitable pop the construction industry became survival. Most did not survive; "buying" work last until the capital is exhausted.

    The current bubble has brought back some of the profit and employment. Most construction companies need people that are not easily found due to the large shift of labor from construction to other industries and out of the USSA.

    Here in SoCal it is still much more competitive than it was in the early to mid 2000's; fewer competitors but still not as much work. The industry is healthy enough to allow materials suppliers to raise their prices. Wages have also risen in conjunction with there being more work now but still less skilled laborers then there were in the mid 2000's.

    Seems to be nothing new in all of this. This is how the construction business has been in SoCal as long as I can remember (1970's). We will see how long this current bubble lasts.