Signs of easing in rate of construction price inflation – SCSI Index

The rate of increase in prices in the construction sector is showing signs of easing, a new report from the Society of Chartered Surveyors suggests.

The latest SCSI Tender Price Index shows that, while costs are continuing to rise, the rate of inflation eased significantly towards the end of last year to 4%.

It was down from a record high of 7.5% in the first half of the year.

That saw the annual rate of inflation for 2022 easing to 11.5% from 14% in the previous year, the index shows.

There were some variations across the country with a slightly higher rate of inflation of 5% in Leinster – outside of Dublin – and Connacht/Ulster in the second half of the year.

The median rate in Dublin and Munster was in line with the national figure of 4%.

The Society attributed the easing in tender price inflation to fuel and energy prices abating coupled with a slight easing in supply chain issues.

“While the hope would be that the downward trend will continue this year, 4% is still a high figure and it’s clear the effects of Russia’s invasion of Ukraine – particularly with regard to increased fuel and energy costs – continues to dominate the market,” Kevin Brady, Chair of the Quantity Surveying Professional Group in the SCSI said.

“Material price increases are expected to continue to fluctuate with rises likely until there is a marked decrease in the cost of electricity, gas, and other fuels.

“Materials which are energy intensive to produce such as aggregates, plasterboard, insulation, and plastic ducting are continuing to experience price rises into 2023. On the domestic front, the main elements which are continuing to drive inflation are high construction activity demand and construction labour shortages,” Mr Brady added.

While acknowledging the unpredictability of the pricing environment given current market and geo-political uncertainties, chartered quantity surveyors believe national tender price inflation is likely to increase by up to 4% in the first half of this year.

“While there are signs the rapid rate of construction inflation has peaked, it is also likely the increased costs of fuel and energy will continue to impact manufacturers for the foreseeable future,” Kevin James, President of the SCSI said.

“The SCSI Tender Price Index has risen by a record 26% over the last two years and concern remains as to how long it will take for inflation to fall to more acceptable levels,” he added.

Mr James anticipated that tendering activity would become more competitive later in the year as economic headwinds and market uncertainty have a potentially beneficial impact on the pricing environment.

“While these developments look set to dampen inflation, anecdotal evidence suggests that investors are likely to adopt a cautious approach in the short term as they seek to navigate an increasingly difficult and complex market,” he concluded.

Article Source: Signs of easing in rate of construction price inflation – SCSI Index – Brian Finn – RTE

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