How Inflation has Impacted Construction Costs
Photo Copyright Jurmu Engineering, Inc. 2022
This is an opinion piece by Nathaniel P. Jurmu
Inflation is having a significant impact on the economy. From commodities, construction materials, to technology, everything has been impacted by the ripple effect of inflation.
One of the primary impacts to the construction industry is the cost of fuel & steel. Fuel powers the heavy equipment, laborer transportation, not to mention the food that is put on the tables. More so, the suppliers of construction materials are also impacted by these cost increases, the result? A broad increase in overall cost to the entire industry, regardless of niche.
Fortunately, construction is an industry that thrives on competitive pricing. When construction material processing and supplying becomes more affordable, suppliers will in turn begin to lower prices to increase volume. As suppliers lower pricing, contractors will select those suppliers and pass the savings on to the customer.
How long this turnaround will take is difficult to determine. The cost of steel is another primary indicator of the overall health of the construction industry. It is one of the most popular construction materials, being used in virtually every project in some way. Right now steel is down 52% from its 2021 high. This cost is trending to pre-pandemic levels according to price chart analytics on the cost of steel rebar (September 2, 2022).
If this trend continues for other related construction materials, we can expect within the next 12 to 36 months to see an improvement in the cost of construction. There is still the possibility of other, unforeseen variables that could alter this projection, and other socio-economic factors. However, the worst looks to be behind us. Although the alleviation of cost may take a few years to manifest itself in the pricing of construction projects. The future looks bright.
- Nathaniel P. Jurmu, P.E., M.ASCE, M.NSPE