Oil and gas wage increases drive up US construction costs

A prominent gain in the cost of wages in the US oil and gas sector has led to a significant rise in construction costs in North America.

Construction costs have risen in February for the 26^th straight month. According to the HIS and Procurement Executives Group (PEG) this increase has been marked by a prominent gain in the cost of wages tied to the continuing demand for shale gas and tight oil.

The HIS PEG Engineering and Construction Cost Index (ECCI) registered 55.9% in February, up 1.8% from January. Both of the ECCI’s subcomponents, the materials/equipment index and the subcontractor labour index, also moved higher during the period.

The subcontractor labour component is up 57.6% in February, compared to 53.8% a month earlier.

Meanwhile, the materials/equipment component of the ECCI also rose in February. The index reached 55.2%, up 54.2% in January and 51.4% in December, and is now at its highest since March 2013.

‘The strengthening picture of labour costs was broad based across both regional and occupational cross sections’, said Laura Hodges, director of the Pricing and Purchasing Service at HIS. ‘Specifically, the US South continues to post the highest index level of any region given the energy boom and demand for labour in the area, which has lifted wage costs relative to other regions in North America’.

The scale of increase does not necessarily indicate that prices rose at a higher rate. However, it does mean that more survey respondents reported rising labour costs, indicating a broader based hike in labour costs throughout the North American construction industry.

Adapted from a press release by Emma McAleavey.

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