Engineering and Construction Costs Edge Higher in January

Engineering and construction costs increased in January, following another increase reading in December last year, 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 56.4 in January, from 53.4 in December, which already marked a rebound above the 50 point mark. This means that prices are increasing for this sector in January and specifically, the sub-indicator for materials and equipment costs increased by 2-points to 56.3, while the sub-indicator for subcontractor labor costs increased by 5.1-points to 51.3, marking it as the component driving the costs up.

The materials and equipment indicator continued to show upward momentum in January, with increases reported in seven of the twelve tracked components compared to December 2025. The most significant gains were observed in copper-based wire and cable, electrical equipment, and transformers, each registering diffusion scores above 70.0 and notable positive changes versus last month. Redi-mix concrete, shell and tube heat exchangers, and ANSI pumps and compressors also saw moderate increases, while fabricated structural steel posted a smaller rise. However, declines were present in alloy steel pipe, turbines, and both ocean freight categories (Asia to the U.S. and Europe to the U.S.), with ocean freight experiencing the largest negative movement at 21.4-points. Carbon steel pipe remained unchanged, reflecting stability in that segment.

“Electrical equipment in general and transformers continue to show persistent supply chain issues to open 2026, something that has defined the category for quite some time,” said Maxwell Clarke, Principal Economist, S&P Global Market Intelligence. “Looking ahead, prospects for improvement in pricing conditions appear limited, caught between limited availability in electrical steel and continued pressure related to tariffs.”

The sub-indicator for current subcontractor labor costs increased in January to 56.4, up from 51.3 in December, marking a continued recovery in pricing conditions. Most categories remained unchanged at a neutral reading of 50.0, indicating stability across regions and disciplines. Notable increases were observed in mechanical and I&E subcontractor costs in the U.S. South and Eastern Canada, where diffusion scores reached as high as 75.0, suggesting stronger upward momentum in these areas.

On the contrary, the six-month headline expectations for future construction costs indicators saw a decrease to 63.4 in January. The six-month expectations indicator for materials and equipment came in at 62.3, which is 6.8-points lower than last month’s figure, continuing with a decrease trend towards more neutral prices. In January, seven of the twelve categories saw decreases compared to December, led by a significant 28.6-point drop in alloy steel pipe and 14.3-point declines in fabricated structural steel, carbon steel pipe, and ANSI pumps and compressors. Redi-mix concrete also posted a notable decrease of 10.0 points, while turbines and ocean freight from Asia to the U.S. saw milder declines of 8.3 and 7.1 points, respectively. The outlook for shell and tube heat exchangers, transformers, electrical equipment, and ocean freight from Europe to the U.S. remained unchanged. Copper-based wire and cable provided the strongest upward pressure to the outlook with a 14.3-point increase, signaling some resilience in that segment.

The six-month expectations indicator for subcontractor labor costs showed a notable increase in January, rising to 65.8 from 57.7 in December—a gain of 8.1 points. Most categories remained near the neutral 50 mark, with the exception of I&E in the U.S. Northeast, U.S. South, U.S. West, and Western Canada, where diffusion scores reached 75.0 or higher, reflecting stronger expectations for cost increases in these regions. On balance, the overall outlook for subcontractor labor continues to push higher

Respondents reported no shortages this month and noted that activity in precious metals projects is picking up.