What the Data Says: Concrete Cost Trendcasting Through Q2 2018

By Matthew Kelliher-Gibson

Whether in response to public policy or concerns about infrastructure, all of America seems to be talking about construction costs. As the leader in construction data, software and expertise, we welcome the conversation and would like to add our insight. We’ll regularly examine the long-term cost trends of the industry’s most vital materials. In this edition of What the Data Says, we’re digging into concrete costs.

The Material: Concrete

There is no construction material more trusted than concrete. Concrete is used to build our bridges, roads and dams and the infrastructure we take for granted like drains and underground pipes. It’s vital to maintaining a healthy infrastructure plus it’s in our homes, our offices, our favorite restaurants—everywhere. Concrete is North America’s base ingredient; it’s the flour in the cake. It holds everything together.

The Data

Gordian regularly collects and analyzes North American construction material costs to ensure the integrity of RSMeans data, our construction costs database. RSMeans data contains more than 55,000 material costs localized to 970+ locations. We spend upwards of 22,000 hours pounding the pavement to gather this data each and every year.

Concrete is an interesting material to analyze because there are several types of concrete, each with its own strengths in specific applications. The concrete used in floor slabs, for example, is not the same as the concrete used to construct nuclear power plants. To account for the difference in concrete types, we placed three commonly-used products— hot mix asphaltic concrete, concrete block and ready-mix concrete—in an index to analyze the cumulative percent change of concrete prices quarter-to-quarter and year-over-year.

The Analysis

If you are new to this series, you should know that the 100 you see in the graph above is a baseline, a reference to the value of the index in Q3 of 2014, where our research begins. All other data points are relative to that value. For a deeper dive into index value, check out an earlier post on steel costs.

Since Q3 of 2014 through Q2 of 2018, the average yearly cost of concrete has gone up just under three percent per year. Quarter-to-quarter, there’s been an average increase of 0.7% but the climb is unsteady. The solid trendline in the graph below shows the index’s mild swings and the dotted line shows the long-term trend upward. The concrete index is far less volatile than its steel counterpart.

An even better way to map concrete’s predictable cost growth over time is with a four-quarter rolling average. For the uninitiated, a rolling (or moving) average works just like a regular average, but it moves forward over a smaller period of the total time. So in our example below the beginning is the average of Q3 2014 through Q2 2015. Then we add a new quarter and drop the oldest quarter.

Here’s how it works with concrete costs. Our baseline subset is Q3 and Q4 of 2014 and Q1 and Q2 of 2015. We can compare that average to that of the next four quarters—Q4 of 2014 and Q1, Q2 and Q3 of 2015. We keep repeating this process until we get to Q2 2018 to produce the rolling average, which you can see in the graph below. It is almost a straight line.

Conclusion

In a word, concrete index growth has been steady. The even, long-term pattern speaks for itself. Concrete prices experience light fluctuations during the year, but consistently end up with a price increase of nearly three percent. That’s what the data says.