Engineering and Construction Costs Continue Climbing in February

Engineering and construction costs increased in February, following another increase reading in January 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 62.6 in February, from 56.4 in January. This means that prices are increasing for this sector in February and specifically, the sub-indicator for materials and equipment costs increased by 5.9 points to 62.2, while the sub-indicator for subcontractor labor costs increased by 7.1 points to 63.5, making both components price drivers.

The materials and equipment indicator continued to grow in February, with increases reported in 10 of the twelve tracked components compared to January. The most significant gains were observed in copper-based wire and cable, as well as in ocean freight from Asia and Europe to the U.S. These components scored above 60.0, with copper-based wire achieving the highest score. Alloy steel pipe and fabricated structural steel experienced smaller increases. However, electrical equipment and transformers saw a slight decrease, although these components are facing sustained price pressure. Redi-mix concrete and ANSI pumps and compressors recorded the largest decreases compared to the previous month.

“The communications and computing sectors continue to show upbeat indicators, which will keep demand for copper-bearing cable strong, although a sharp drop in US imports is a concern,” said Jason Kaplan, Director, S&P Global Market Intelligence. “Since the imposition of Section 232 tariffs on copper-intensive products from September, US imports of copper wire are down over 85%.  Even without support from elevated copper prices, cable price indicators are already rising and will feel upward pressure through 2026.”

The sub-indicator for current subcontractor pricing increased to 63.5 in February, up from 56.4 in January, indicating stronger upward momentum. Most categories in the Northeast remained stable at 50.0, while the Midwest showed moderate gains, particularly in mechanical and I&E, which reached 66.7. The South exhibited firming prices, especially in I&E at 70.0 and civil at 60.0. The U.S. West reported the highest increases in mechanical and I&E reaching 83.3. In Canada, Western Canada showed consistent pricing pressure across all disciplines at 75.0, while Eastern Canada had mixed results, with I&E at 75.0 and civil and mechanical remaining at 50.0.

The six-month headline expectations for future construction costs indicators rebounded to 75.6 in February. The expectations indicator for materials and equipment reached 73.1, which is 12.2 points higher than last month’s figure. In February, all categories scored above the 50-mark, with notable increases of 32.1 points in alloy steel pipe and 31.3 points in ANSI pumps and compressors. Additionally, fabricated structural steel and carbon steel pipe saw increases exceeding 20 points. There was a 27.4-point decrease in the turbines category; however, the indicator still shows that price expectations are moving higher.

The six-month expectations indicator for subcontractor labor costs rose to 81.3 in February, up from 65.8 in January, reflecting a 15.5-point gain. Notable increases were observed in the U.S. Northeast, Midwest, and West, with I&E in the West reaching the highest levels among all categories. Additionally, the U.S. South also demonstrated strength. Overall, the outlook for subcontractor labor costs continues to trend upward. 

Respondents indicate that the market is experiencing significant shortages in general laborers, pre-cast piles, and medium voltage cable, while transmission and substation steel manufacturers are oversold, raising quality and schedule concerns. Many suppliers across various material and equipment types are struggling to meet contract delivery dates due to sub-supplier issues, workforce shortages, and overcapacity. Additionally, rising metal prices, particularly for copper and zinc, are complicating the supply of electrical equipment, including transformers and switchgears.

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