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Construction InflationImpacts, Calculations and Outlook 

The higher cost of goods, services and labor is no surprise to any of us in the construction industry. What is a surprise is the number of various indexes which measure the cost of inflation. How do we know where to look and what to rely upon to help us navigate the ever increasing cost of doing business?

Our first recommendation is to discount those indexes that are not applicable to our industry. Knowing where to look for information and where not to look helps us ensure we have the correct information as we formulate our project pricing. 

What not to use: The CPI - Consumer Price Index. Without going into the variables of this Index, what is of importance to us is that this data is not related to the construction industry and should not be used to adjust construction pricing.

What may be useful: 

The PPI - Producer Price Index.

This index measures inflation by tracking material cost at the producers level but does not include prices or bids at the “as built level”.

The PCE- Personal Consumption Expenditure Index.

The Federal government uses the PCE to forecast inflation (currently projected at an average increase of 2.7%) but this index excludes cost of food and energy. Construction inflationary increases vary from a range of 3.5-6% depending on the US city location of the project.

Of the most relevance to us are those indexes specific to our industry. There are several you may want to review when tabulating bid prices and they include:

Construction Cost Index 

Building Cost Index

Material Cost index

Recent inflation increases are projected at +2.6% for overall construction cost, +3.8% for building cost and +4.5% for material cost. Engineering News Report indicates the BCI index includes actual construction inflation historical data which may provide a tool for spotting current inflation trends. 

All these numbers make for interesting reading but where our rubber meets the road is in tracking our cost here in Texas. Factors such as weather, interest rates, cost of materials and labor all bear a direct impact on our costs. 

The change of cost and resulting inflationary numbers have increased significantly since 2020. The PPI Index, based on source numbers from the U.S. Bureau of Labor Statistics, reflects inputs to construction have increased by 42.1% as of April 2024. The look back tells us a story but the look forward is critical to continued success. 

The State of Texas provides a Standard Construction Cost (Adjusted for Future Inflation) calculator which can be accessed online at:

This calculator is interactive and allows you to input information specific to your project. Below is a snapshot of the calculator.

As we consider our pricing to ensure adequate bid submissions, we must also take into consideration not only current inflation rates impacting cost, but also take into consideration the project duration. Should your project be multi-year, it is wise to account for potential future inflation costs as well. 

We have managed to ride the wave of labor shortages, higher cost of materials, and supply chain issues. All of these issues impact our longevity and success. As such the USHCA will continue to work with you to monitor these issues and remain available to assist you with questions or concerns you may have.


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