1Q COST REPORT: What Drives ENR’s Cost Indexes - ENR | McGraw-Hill Construction

Description:
Although ENR’s cost indexes measure the costs of nonresidential buildings structures, the downturn in the housing market still has a major impact on index movement. In March, lumber prices in the indexes were down another 2% after dropping 14% the previous year. Lower lumber prices are the main factor keeping inflation low. Inflation measured by the Building Cost Index (BCI) kept in the 2% to 3% range for the last two years, after increasing 5%in 2005 and 10% in 2004 when the index absorbed a 31% increase in steel prices. The Construction Cost Index (CCI) was less affected by the drop in lumber prices but escalation in the CCI was checked by modest increases in labor costs. The mechanics of what drives ENR’s indexes are explained below.

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