Construction materials cost inflation on hold
Materials prices for nonresidential projects in December were 3% below the price peak in July 2006.
While the materials price index for nonresidential projects edged up 0.2% in December, this was mostly due to a warm weather surge in construction activity. Reed Construction Data expects the price index to be steady to slightly lower early in 2007 before resuming steady growth later in the year. Price inflation for nonresidential building projects will be slightly higher than overall inflation in the economy through next year.
Labor rates and contractors' margins will contribute relatively more—and materials cost relatively less—to overall project costs in 2007-08 than in the last few years. This is because there is little reserve building capacity available in many markets after more than three years of rising construction activity.