Engineering and construction costs stabilize in December

Engineering and construction costs stabilized in December, following brief contractionary reading in November, according to the Engineering and Construction Cost Indicator from PEG and S&P Global Market Intelligence. The headline Engineering and Construction Cost Indicator, a leading indicator measuring wage and material inflation for the engineering, procurement and construction sector increased to 53.4 in December, from 48.7 in November, rebounding from its first sub-50 reading since October 2020. The sub-indicator for materials and equipment costs increased by 5.1-points to 54.3 in December, while the sub-indicator for subcontractor labor costs increased by 3.7-points to 51.3.

The materials and equipment indicator increased in December, with increase seen in eight of the twelve components compared to last month. These gains were partially offset by declines in two categories, alongside two that remained unchanged. Although a few categories saw notable changes, most respondents highlighted prices remaining the same compared to what has been seen in recent months. The largest increases were seen from alloy steel pipe, carbon steel pipe and turbines. Meanwhile milder increases were seen from ocean freight, electrical equipment, shell and tube heat exchangers and fabricated structural steel. Unchanged readings were seen from redi-mix concrete and ANSI pumps and compressors. Providing the greatest offset to the increase seen in December was a 25.0-point decrease seen in copper-based wire and cable and a 5.7-point decrease from transformers.

“Carbon steel pipe prices are likely to hold steady through December and January with hot rolled sheet prices modestly rising to finish 2025,” said Amanda Eglinton, Economics Associate Director, S&P Global Market Intelligence. “Soft demand conditions will limit pipe producer’s ability to pass on the higher cost. Sheet prices will subsequently trend sideways to slightly downward through the remainder of 2026, with pipe prices largely following a similar trend.”

The sub-indicator for current subcontractor labor costs increased in December to 51.3, from 47.6 in November, rebounding from its first sub-50 reading since October 2020. Despite this increase, most categories remain unchanged at readings of 50.0. The only categories that remain below neutral are in the U.S. Northeast and U.S. Midwest regions.

Providing a mixed tone to the survey, the six-month headline expectations for future construction costs indicators saw a decrease to 65.7 in December. The six-month expectations indicator for materials and equipment came in at 69.1, which is 6.3-points lower than last month’s figure. Nine of the twelve categories saw decreases in December, highlighted by declines in ANSI pumps and compressors and fabricated structural steel, posting decreases of 23.2-points and 10.7-points, respectively. Milder decreases were also seen from copper-based wire and cable, carbon steel pipe, alloy steel pipe, transformers, electrical equipment and ocean freight. Providing modest upward pressure to the outlook were increases in shell and tube heat exchangers and redi-mix concrete. This was accompanied by no change in the outlook for turbines.

Meanwhile, the six-month expectations indicator for subcontractor labor little change in December with most categories holding near the 50-mark. On balance, the overall sub-contractor labor outlook reading pushed higher to 57.7 in December, edging higher from the 57.1 reading seen the month prior.

Respondents reported few shortages this month, largely confined to electrical equipment.