3 ways inflation impacts the construction industry

The national inflation rate in 2022 is 8.6%, the largest annual increase since December 1981, according to data published by the U.S. Labor Department. This massive inflation rate has caused a public outcry and impacted many industries including construction. Construction materials have gotten more expensive along with other goods, with the cost of building materials rising 31.3% from early 2020 to 2022, according to Bob Vila. Here’s everything you should know about how inflation is impacting the construction industry right now:

Project Delays

The cost of materials continues to rise and supply chain shortages continue to plague the construction industry as manufacturers try to recover their workforce after the onset of the COVID-19 pandemic. All of these factors contribute to project delays as the construction and engineering industry struggles to get ahead of the curve.

Many companies are considering alternative delivery methods during this time to get projects and order extra materials ahead of time to get back on track, according to this Georgia Tech article.

Higher Labor Costs

Labor shortage is still a problem in the construction industry and will continue to be for a while, resulting in higher labor costs for business owners. Right now, construction workers are fighting for better pay and working conditions, further widening the gap in labor.

Many companies are responding to this increase in labor by offering more people-based programs, according to Scott Roudebush, founder of The Legacy Group. He predicts more discussion on the career trajectory of construction workers instead of just hourly wages. Companies that increase retention rates and hire more experienced workers will have the upper hand when it comes to battling inflation.

New Bidding Strategies

Since the price of labor and materials has been increasing since 2020 and most likely will continue to rise, it’s difficult for leaders of construction and engineering companies to predict the price for future materials or create a successful bidding strategy. This is troubling since the profit margins in this industry were already relatively slim.

Although there’s no direct solution for this situation right now, we can only hope the U.S. inflation rate stabilizes in the near future.

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