update 9-19-22 SEE INDEX TABLES AND PLOTS updated to Q2 2022. Should we expect a drop in prices for building materials in 2022? However, because the inventory builders now have was purchased when prices were high, the price for lumber is still 60% . The other 6% of total steel cost applies to all buildings. The subcontractor labor index rose 3.3 points in to 89.1 from 85.8, while the sub-index for materials and equipment costs fell 4.8 points to 71.4. So after a collective 30,000 hours of research and validation by our team of data engineers, lets take a look at some of the cost changes in the 2022 RSMeans dataset. With mortgage rates soaring, many believe the worst of the wild lumber ride is over and prices will continue to slowly decline over the last two quarters of 2022, bottoming out around the $450/MBF mark. The most watched indicators of the rate of inflation are the costs of various construction materials and the labor needed to install them. Engineering News Record (ENR) BCI inputs index for 2021 is up 10.0%. update 8-12-22 See Summary. You can see that the construction prices in the EU have grown by 45% in the last 16 years. Ive provided only one table for index reference. Volume of work seemed to be recovering in the first quarter of 2021, up 3% from the October low, but then struggled most of the year. In this case the starts declined in 2020, but that 2020 decline was so broad and so deep, even with an increase in starts in 2021, backlog to start 2022 has not yet recovered (to the start of 2020). These two reporting methods cannot be mixed. The result of this additional research is an enhanced localization model that will provide a reliable foundation for estimates and budgets amid the lasting effects of the pandemic. Here are some specific examples of material cost changes: Off the bat, its good to see lumber prices coming down. Total Volume is forecast flat to down over the next 12 months. Cost of building with midpoint in 2016 x 1.28 = cost of same building with midpoint in 2021. All original data is gathered for all indices, but since all indices have different index dates (start in different years), all data is modified to a common base date, in this case 2019. As a CIS researcher, I have been able to observe vast amounts of data and project underlying trends that could have a huge impact on the future of various industries. By 3rd qtr 2021 volume was down 21%. The construction industry has yet to settle back into predictable and steady cycles. When using non-localized, national average cost data for 2021, the total estimated cost comes to $12.1 million. For example, with construction inflation increasing at 3% annually, a nonresidential building spending decline of -2% would reflect a work volume decline of 5%. In 2021, Nonresidential Buildings jobs increased by slightly less than 1%, but construction volume was down 10%. You can submit your details in this form to obtain more information about how to get started with Billd today. Cost decreased in 2015 and 2016, the only negative costs for inputs in the past 20 years. By the end of 2023 volume is still down 3% from Feb 2020. Thats the # that is needed, annual inflation. According to the National Association of Home Builders, they believe families should expect increased interest rates and market turmoil. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Enter your email address to follow this blog and receive notifications of new posts by email. The index for routes from Europe to the U.S. dropped from 81.8 to 72.7, while the index for routes from Asia to the United States eased from 72.7 to 68.2. Researchers concur: 2023 will bring construction cost relief. Home sales are forecast to soften in 2022, declining by 1.4% with limited listings and affordability becoming growing constraints for buyers, and then by another 3.8% in 2023. . Which table should one refer to, to see how much more they could expect to build a house this year, vs last year? During the 2nd Quarter of 2022 with interest rates rising and the housing market declining, we have seen the demand for lumber start to cool down. Non-building volume dropped 7%. Nonbuilding Infrastructure inflation, from 2013 to 2017 averaged less than 1%, but then jumped to 5% in 2018 and 2019. These costs jumped 19.6% year-over-year between 2020 and 2021. https://www.census.gov/construction/nrs/pdf/price_uc.pdf, Turner Construction Cost Index average annual for 2021 is up only 1.9% from 2020. But some sources expect gains to moderate from 2021. Higher mortgage rates and a slowdown in DIY home renovations are easing demand for lumber, Insider says. Thanks for the clarification on this. Indeed, when it comes to the 2022 housing market, the outlooks are all over the place. Looking forward to your future updates. I was referred to your page from one of our estimators out of our Tennessee Office. Data release - February 8, 2023. Nonresidential volume dropped every month in 2020 after the February 2020 peak, down 19% by December, but thats not the bottom. Total construction volume since Feb 2020 is still down 2.5%. No one predicted 2021 construction inflation. Building materials prices were 25% higher in 2022 than they were in 2021, new government figures show. These two words, Inflation and Escalation, both refer to the change in cost over time. update 5-3-22 This article AND the attached PDF downloadable document have been updated to include 1st qtr 2022 inflation updates. But we gained back far more jobs than volume. 4th . Is there a link to it? Less cars being manufactured means less demand for steel, which in turn, has made steel cheaper. Although total volume for 2022 is forecast up 1.7%, with Residential volume forecast up 2.3%, Nonresidential Bldgs volume up 4% and Non-building volume forecast down 2.4%, we will not see total construction volume return to Feb 2020 level at any time in the next three years. There are so many issues that can trip a contractor up, its amazing that you deal with so much risk on an ongoing basis, and you seem to manage through that process, Basu says. Since 2010, Construction Spending is up over 100%, but after adjusting for inflation, Volume is up only 31%. Unfortunately, that was not the case. That means it now takes more jobs to put-in-place volume of work. BCIS Materials Cost index is based on the materials component of the Price Adjustment Formulae Indices . Example: What is cost inflation for a building with a midpoint in 2021, for a similar nonresidential building whose midpoint of construction was 2016? update 5-8-22 This article AND the attached PDF downloadable document have been updated to include changes in inflation in PPI factors. Richard Branch, chief economist for Dodge Construction Network, said he expects price increases to continue . Most of the spending from those lost starts would have taken place in 2021. Thru February 2022, over the last 4-5 months, the year/year rate of increase in this index has jumped from 12% yoy to 17% yoy. However, according to the Bureau of Labor Statistics, the growth rate of construction materials in July 2022 was 14.8%. Residential dips 4% then recovers to current level, nonresidential buildings volume increases 6% and Non-building infrastructure volume will fall 7%. So, we chose four geographically distant locations from the 970 local markets contained in the RSMeans database and repeated the same exercise. In 2020 it dropped to 2.5%, but for the six years 2014-2019 it averaged 4.4%. That allows all indices to be easily compared. 2022: Consolidation and rebalancing. Engineering News Record Building Cost Index (ENRBCI) and RSMeans Cost Index are other examples of commonly used indices that do not capture whole building cost. Price (Rs.) When activity is high, there is a greater opportunity to submit bids on more work and bid margins may be higher. The most watched indicators of the rate of inflation are the costs of various construction materials and the labor needed to install them. Dont Miss: Cash Out Refinance Construction Loan. By October, volume reached a low for the year, down 8%. Producer Price Index (PPI) Material Inputs(which exclude labor)to new construction averaged less than 1%/yr. Among contractors, the expectation of new equipment purchases in 2022 is mixed: 43% say it will remain the same, 38% say it will increase, 14% say it will decrease. Available in costbooks and automatically uploaded to RSMeans Data Online, quarterly updates help you ensure your estimates are solid amid a shaky industry. However, construction costs dont increase at identical rates across the nation. . The extent of volume declines would affect the jobs situation. Jobs are up 41%. +6.7% Construction Analytics Nonres Bldgs Mar, +5.4% PPI Average Final Demand 5 Nonres Bldgs Dec, +5.3% PPI average Final Demand 4 Nonres Trades Dec, +1.9% Turner Index Nonres Bldgs annual avg 2021 Q4, +4.8% Rider Levett Bucknall Nonres Bldgs annual avg 2021 Q4, +16% Mortenson Nonres Bldgs annual avg 2021 Mar, +11.7% U S Census New SF Home annual avg 2021 Dec, +7.4% I H S Power Plants and Pipelines Index annual avg 2021 Dec, +7.1% BurRec Roads and Bridges annual avg 2021 Q4, +9.11% R S Means Nonres Bldgs Inputs annual avg 2021 Q4, +10.0% ENR Nonres Bldgs Inputs annual avg 2021 Dec, 2020 Rsdn Inflation 4.5%, Nonres Bldgs 2.6%, Non-bldg Infra Avg -0.3%, 2021 Rsdn Inflation 13.9%, Nonres Bldgs 7.4%, Non-bldg Infra Avg 7.8%, 2022 Rsdn Inflation 15.4%, Nonres Bldgs 12.2%, Non-bldg Infra Avg 13.6%, 2023 Rsdn Inflation 6.0%, Nonres Bldgs 4.8%, Non-bldg Infra Avg 4.3%. According to Basu, based on past experiences, most construction firm failures occur during early construction recovery coming out of economic turmoil. Commercial construction activity is projected to see growth of just under 5% this year, and an additional 5.3% in 2023, and as such is one of the biggest surprises in the construction outlook. It's something to keep in mind if you are building a home - or really anything - this year. Avg inflation for all down/flat years is less than 1%. Hindsight is always 20/20. Spiking materials prices are making it challenging for most firms to profit from any increases in demand for new construction projects, said Stephen E. Sandherr, said AGCs chief executive officer in a release. Copper. In 2021, spending was down for nonresidential buildings and non-building. I carry future years at or near long term average. 2-10-22 See the bottom of this post to download a PDF of the complete article. On Turners website, if you click on 4th qtr report, you will see that number reported in the annual summary. The RCR is a price index that measures changes in the price level of inputs to railroad operations: labor, fuel, materials and supplies, and other operating expenses. From planning to design, to procurement, construction and operations, Gordians solutions help clients maximize efficiency, optimize cost savings and increase building quality. With the average kWh price in the UK in 2022 being around 20 p/kWh, the total energy-based cost ends up at 14 720 pounds. New construction materials New materials can be engineered to have specific properties which help reduce construction costs. CBRE's new Construction Cost Index forecasts a 14.1% year-over-year increase in construction costs by year-end 2022 as labor and material costs continue to rise. Assuming a typical structural steel building with some metal panel exterior, steel pan stairs, metal deck floors, steel doors and frames and steel studs in walls, thenall steel material installed represents about 14% to 16% of total nonresidential building cost. from 2012 to 2017. Steel Prices Reach Levels Not Seen Since 2008 by The Fabricator. However,escalationis the termoften used in a construction cost estimate to represent anticipated future change, while more often the record of past cost changes is referred to as inflation. When spending increases less than the rate of inflation, the real work volume is declining. A final word about terminology: Inflation vs Escalation. Material price hikes. When the activity level is low, contractors are all competing for a smaller amount of work and therefore they may reduce margins in bids. It appeared the cost of wood might hover close to those pre-pandemic levels for some time. (202) 266-8448. In 2011, supervisory jobs was 24% of all construction jobs. The IHS Refinery, Petrochemical plants index fell 10% from 2014 to 2016. Residential inflation indices are primarily single-family homes but would also be relevant for low-rise two to three story building types. RE: +1.9% Turner Index Nonres Bldgs annual avg 2021 Q4 Is this for Q4 only or total yearly increase for 2021. In just the past year, prices for materials used in residential construction have climbed nearly 20%. https://www.agc.org/learn/construction-data. I found it, but does CA mean California? Yes, the cost in 2022 would be 7% more than 2021. Total volume for 2022 is forecast up only 1.7%. Per 50 kg bag. Those are remarkable nonresidential declines, not seen that deep since 2010. For future years I use to long term averages, about 4% for nonresidential building, 3.5% for nonbuilding and closer to 4.5% for residential. Or 16%? Almost all gains in 2021 spending are due to the 23% gain in residential. After accounting for -0.3% deflation, volume increased 0.4%. Building materials prices increased 20.4% year over year and have risen 33% since the start of the pandemic. In January 2021, I had forecast We will not see construction volume return to Feb 2020 level at any time in the next three years. Original article attached IS NOT updated. As firms are getting ready for the next generation of construction projects, they take on some expenses, he says. As building sites reopened in July 2021, a wave of price inflation has hit construction materials, heaping costs onto beleaguered builders struggling to make up for lost time after a year of intense disruption. See latest PPI tables. By David Logan on August 15, 2022 ( 0) The prices of building materials rose 0.4% in July (not seasonally adjusted) even as softwood lumber prices increased 2.3%, according to the latest Producer Price Index (PPI) report. Non-building average inflation was 7.5%, the highest since 2008. One national resource is reporting only 1.9% inflation for 2021! While the pandemic was treacherous for contractors, this next early stage of recovery can be as well. Total all construction jobs increased by 2.3%, but construction volume was down 1.1%. Quarter. Data sources and methodology. The mills can't keep up. Check their web site at . cost of construction materials in the U.S. Commercial Construction. AVG 2021 vs AVG 2020, Rsdn+153k (+5.3%), Nonres Bldgs +28k (+0.8%), Non-bldg +9k (+0.9%). Most nonresidential construction markets had a weaker spending performance in 2021 than in 2020. According to the Hays/BCIS Site Wage Cost Index, all-in site rates rose by 8% in 4th quarter 2021 compared with a year earlier but quarterly increases . That increases inflation. It is expected to fall another 3% in 2022. Looking back, we now see nonresidential buildings inflation is 7%, the highest since 2006-2007 and residential inflation is 13%, the highest since 1977-1979, in part driven by the highest rates of increase in materials on record. Even though material input costs were up for 2020, nonresidential inflation in 2020 remained low, possibly influenced by a reduction in margins due to the decline in new nonresidential buildings construction starts (-18%), which is a decline in new work to bid on. The industry is sold out for the remainder of 2022. The price index of services inputs to residential construction registered even steeper increases, rising 3.2% in March, 5.1% in February and 6.2% in January . Non-building infrastructureindices are so unique to the type of work that individual specific infrastructure indices must be used to adjust cost of work. Residential inflation in 2021 jumped to 13.2%, the highest on record back to 1967. However, the average inflation for six years from 2013 to 2018 was 5.2%. Note: Data for January 2022 and 2023 is forecast, BCIS Plant Cost Index is not forecast. Thanks. Although inflation is affected by labor and material costs, a large part of the change in inflation is due to change in contractors/supplier margins. How to use an index:Indexes are used to adjust costs over time for the effects of inflation. This rate of change is not markedly higher than years past, as wages almost always increase year over year for every trade or skill. New-home costs likely will continue to increase as rising building material costs squeeze construction budgets. Constant $ = Spending minus inflation = Volume. 2021 Input costs for Residential and Nonresidential Buildings is the highest on record. There are signs that the price of building materials may be starting to settle after a sharp 25% rise last year, but the outlook is still uncertain. Total volume for 2022 is forecast up only 1.7%. Spending going down? 7% is the forecast for 2022. When it comes to lumber, the 316% increase in price since the beginning of 2020 is adding a whopping $36,000 to the cost of building a new home. : https://www.census.gov/construction/nrs/pdf/price_uc.pdf Tender prices are forecast to rise by 3% over the first year of the forecast period, by 5% over each of the following two years and by 6% per annum over the final two years of the forecast. Any project delay can slow down your business and force you to reject clients because of a backlog. However, construction costs don't increase at identical rates across . Over the next five years, building tender prices are expected to rise by 27%. Products produced from petroleum, too, have seen notable cost increases. Heres a list of some 2021 indices average annual change and date updated. Higher borrowing costs and high prices mean affordability issues will . However, as the COVID-19 infection rate increased, the demand for lumber soared as home building and renovation became more popular. Nonresidential Bldgs volume is forecast up only 4% and Non-bldg volume is forecast down 2.4%. How can I determine what X is? Thats why Gordian releases quarterly updates to localized RSMeans data. What does the future hold for lumber prices? As noted previously, most reliable nonresidential selling price indexes have been over 4% since 2014. http://turnerconstruction.com/cost-index, Rider Levitt Bucknall nonresidential buildings index average for 2021 is up 4.8% from 2020. https://www.rlb.com/americas/, Mortensons cost index of nonresidential buildings data is posted through Q4 2021. For 2022, spending is forecast to increase 10%, but inflation is forecast at 6%, resulting in volume growth of 4%. Construction Spending drives the headlines. Input costs averaged over 5% for 2018-2020. But annual averages tell a much different story. Spending Forecast for 2022 is expected to increase +3.0%. Also, improvements are occurring in the supply chain that had bottlenecked the lumber market over recent months. Since construction started back up following the pandemic earlier this year, a pattern has begun to emerge which could prove costly in the near future due to various factors Increasing building material costs. Western Australia and Queensland are expected to record 7% and 6% year-on-year construction cost increases the highest among the states. from 2015 to 2019 averaging +25% inflation for 5 years. However, the old adage is as true as it has ever been. Inflation has put a damper on construction, leading to higher costs for construction companies. Hi-rise residential work is more closely related to nonresidential building cost indices. This translates to approximately 73.6 MWh. At this time, it appears that relief may not be in sight until early 2023. 2023 rates are much lower because I do not project out the current rate. Revisions to 2022 inflation. Overall cost inflation for materials is expected to begin cooling by the end of 2022 . When construction activity is increasing, total construction costs typically increase more rapidly than the net cost of labor and materials. And market uncertainty has reduced the shelf life for bids and estimates from weeks to days. The level of activity has a direct impact on inflation. Daniel, Published Jun 27, 2022. This follows the 20% decline in new starts in 2020. It is the most expensive construction materials. The record high and the rising costs of lumber have made headlines recently, but signs of improvement offer some hope to homebuilders. As demand for new projects continues to grow and contractor backlogs fill, there will be less incentive to bid aggressively, and contractors will aim to pass through cost increases to owners as soon as the market can bear it. This represents a 1.6% quarterly increase from the Third Quarter 2022 and an 8.29% yearly increase from the Fourth Quarter 2021. The fact that the housing sector boomed during a time of short-term hysteria and inflation could be an indicator of how the housing market has evolved. Also INDEX TABLES AND PLOTS updated to Q3 or Q4 where available. Residential spending was the star of the year, up 23%, the largest yearly % gain on record.Nonresidential buildings inflation in 2021 jumped to 6.7%, the highest since 2007. Currently, the price remains volatile. Steel Prices Reach Levels Not Seen Since 2008, Construction Inflation 2022 revised 5-8-22, PPI Tables 2022 Producer Price Index toNOV22, Construction Inflation Index Tables + Links, https://www.census.gov/construction/nrs/pdf/price_uc.pdf, Look Back at 2022 Construction SpendingForecasts, Infrastructure Construction Expansion Not SoFast, Construction Year-End Spending ForecastDec22, Midyear 2022 Spending Forecasts Compared updated2-1-23, Follow Construction Analytics on WordPress.com. Residential buildings inflation reached a post-recession high of 8.0% in 2013 but dropped to 3.5% in 2015. Volume was down -1.1%. Those fluctuations are not limited to a specific direction: many costs have increased, though some may have decreased. WEONEIL CONSTRUCTION In active markets overhead and profit margins increase in response to increased demand. Nonbuilding starts were down 15%, equivalent to a loss of $50 billion in new work that would likely have been spread over 2-5 years. Supply chain bottlenecks. Ed Thank you so much for the extremely detailed and well thought out analysis. The IHBA also state there has been an estimated 4% rise in bricks prices since December 2019 and a 1% increase in 2021 alone. CA means Construction Analytics. This year, rising materials costs made the typical new construction home cost $36,000 more than it normally would. In general, there is a clear upwards trend with some steeper growths during some periods. Construction starts were up in 2021, but backlog leading into 2022 is down. Among several inputs, there is a recent BLS update to the Final Demand indices. Volume was down -2.5%. Home Behind the Headlines Construction Inflation 2022. While that rate of change is high, given the state of the market over the past year, most construction professionals will be unsurprised to see such a large percentage; The ripple effects of the pandemic have been felt in virtually every corner of the construction industry. On the high end, there is Zillow, which is forecasting 13.6% price growth in the coming 12 months, and . Looking at the average number of construction jobs in the last 4 years, the average of 2021 jobs vs the average of 2017 jobs, production jobs increased +5%, but supervisory jobs increased +12%. Its in this context of frenzied market movements and a foggy future that our 2022 RSMeans data launched. Jobs are up 41%. The report noted that Perth is undergoing a significant infrastructure pipeline, with previous border closures and competition from the mining sector constraining labour supply in the state while driving wage increases. Is there anything driving 2023 inflation dropping off so substantially (impllied ~4.5%). When we see spending increasing at less than the rate of inflation, the real work volume is declining. The sub-index for current subcontractor labor costs came in at 89.1 in June, another monthly increase from Mays 85.8. In fact, the forecast shows non-building volume still drops another 4% in 2023. These issues are all present now and all work to increase inflation. Prices declined in the Midwest (-0.4%) and South (-0.3%) and were unchanged in the West. This adds up to an 8% jump in building materials prices since the start of 2022. Final costs of contractors and buildings is up 5.3%. Read here for more information. Long-term construction cost inflation is normally about double consumer price index (CPI). If jobs increase faster than volume, that adds to productivity losses and adds to inflation. I am trying to determine If I should borrow the funds today and purchase materials and contract for the work now at a 4% rate of interest or contribute to a reserve that will achieve the necessary funds over the next 9 years (for mandated work)? With exception of 2006, when jobs increased by 10%, but volume dropped by 5%, a negative impact 15% spread, similar to 2018, these plot lines have been moving in tandem like this, with minor differences, back to 1992. Individual types of non-building infrastructure require attention to specific indices related to that type of work. 98% of labor costs increased over the last year. Spending for 2021 was up 8%, but after adjusting for inflation, real volume after inflation was down. This combination of factors leads JLL to extend its forecasts for 4.5 to 7.5 percent final cost growth for nonresidential construction in calendar year 2021 and to predict a similar 4 to 7 percent cost growth range for 2022. Deflation is not likely. 2020 Rsdn Inflation 4.5%, Nonres Bldgs 2.6%, Non-bldg Infra Avg -0.3%, 2021 Rsdn Inflation 13.2%, Nonres Bldgs 6.7%, Non-bldg Infra Avg 7.5%, 2022 Rsdn Inflation 11.7%, Nonres Bldgs 6.3%, Non-bldg Infra Avg 5.5%, 2020 Rsdn Inflation 4.6%, Nonres Bldgs 2.7%, Non-bldg Infra Avg -0.3%, 2021 Rsdn Inflation 13.4%, Nonres Bldgs 6.8%, Non-bldg Infra Avg 7.8%, 2022 Rsdn Inflation 14.6%, Nonres Bldgs 9.9%, Non-bldg Infra Avg 12.0%. AGC April Construction Inflation AlertThe construction industry is in the midst of a period of exceptionally steep and fast-rising costs for a variety of materials, compounded by major supply-chain disruptions and difficulty finding enough workersa combination that threatens the financial health of many contractors. That was at a time when business volume went down 33% and jobs were down 30%. Matt Lee Last year, a sharp drop . Some manufacturers will leave the low-rise construction market, focusing on larger developers, as the latter are more likely to receive government support. Residential spending is forecast up 13% for 2022, but a forecast for 11.7% residential inflation slows volume growth to 2.3% for the year. Only twice in 50 years have we experienced construction cost deflation, the recession years of 2009 and 2010. update 11-16-22 PPI INPUTS table and FINAL DEMAD table for October updated 11-16-22. update 12-1-22 PPI INPUTS table for November updated 12-10-22. For Dec21 vs Dec20, Residential jobs are up 75k, Nonresidential Bldgs up 61k and Nonbuilding up24k. (LogOut/ Residential volume for 2021 is up +10% while Nonresidential Bldgs volume is down 10% and Non-bldg volume is down 7%. You can also scroll down in this post to the same information. Deflation is not likely. Left unabated, these price increases will undermine the economic case for many development projects and limit the positive impacts of the new infrastructure bill. Producer Price Index (PPI) for Construction Inputs is an example of a commonly referenced construction cost index that does not represent whole building costs. As of December 2021, jobs are down 2% from February 2020 peak. Dont Miss: New Construction Townhomes San Antonio. JLL shows that high-wage states are clustered in the Northeast corridor and the West Coast. Coldwell Banker Richard Ellis (CBRE) is forecasting a 14.1% year-on-year increase in U.S. construction costs by the close of 2022. The Building Construction Price Indexes (BCPI) are quarterly series that measure change over time in the prices that contractors charge to construct a range of new commercial, institutional, industrial and residential buildings. Total All Volume, spending minus inflation, is expected to again reach the same bottom in mid-2022 as in 2021. The annual average inflation for 2021 is up 16% over 2020. https://www.mortenson.com/cost-index. Thats a 11% swing in productivity. Lumber prices dropped more than 6% to $829 per 1,000 board feet this week, the lowest of the year, Insider reports. Unless volume of work increases or job growth slows, by the end of 2022, volume will be lower than today. A nonresidential buildings index would be representative of commercial construction or hi-rise residential construction, since hi-rise residential is quite similar too commercial construction and in fact substantial portions of the building are constructed by firms classified as commercial constructors. The firm cited financial pressures such as inflation, labor shortages, supply chain challenges, Covid-19, and Russia's invasion of Ukraine as causes for the sharp rise. But jobs recovered all but 3% by December 2020. One of the best predictors of construction inflation is the level of activity in an area. Construction material prices rose 20 percent between January 2021 and January 2022, according to analysis of government data . However, aside from remarkable cost increases for materials, if jobs growth continues while volume declines, then productivity declines, and that will add to labor cost inflation.