Construction cost index overview

From Statistics Explained

Data from June 2014, most recent data: Further Eurostat information, main tables and database.

The construction costs index (CCI) (sometimes also referred to as “construction factor price index” or a “construction input price index”) is a European Union (EU) business cycle indicator showing the trend in the costs incurred by contractors in the construction of buildings. The CCI presents the total costs for new buildings. In addition, an index for material costs and an index for labour costs are available. Material and labour costs represent the most important cost components for construction.

Figure 1: EU-28 quarterly construction cost index and its components for new residential buildings, gross data (2010=100), Source: Eurostat (sts_copi_m)
Table 1: Annual growth rates, construction cost indices for new residential buildings, gross data (2010=100), Source: Eurostat (sts_copigr_a)

Main statistical findings

Between 2005 and mid-2008 construction costs (for residential buildings) increased relatively steadily in the EU-28 (Figure 1). In the second half of 2008 the index began to fall and reached its lowest level one year later. In total however, the decline was not particularly pronounced, it amounted to around one percentage point. In 2010 the index started to increase again. Less than one year later it regained the level it had displayed before the crisis and since then it has been on a steady upward trend with average quarterly growth rate of 0.5 percentage points. The development of the construction cost index was mainly influenced by the material cost component, while the labour cost component continued to grow even during the crisis - although at a somewhat slower pace than before.

Table 1 provides the annual growth rates for the EU-28 and the Member States for the period between 2005 and 2013. With few exceptions the EU countries display a development that is broadly similar to the one that can be found for the EU aggregate. Differences can be found in the timing and the size of the decrease of the cost index. The construction cost index for residential buildings started to fall first in Ireland (but note that in Ireland the cost index is approximated by a price index, see below), in the other countries this development occurred only several months later. The reductions of the cost index were strongest in Ireland and in the Baltic States. In a number of countries the rates of change in 2008 and 2009 remained positive although generally lower than in the first half of the period under observation. In 2011 only Ireland experienced a decline in the construction cost index. In 2012 and 2013 the index dropped in several countries, e.g. in Greece, Croatia and Slovenia.

Data sources and availability

Data collected by Member States are transmitted to Eurostat as an index, with the year 2010 as base year. The Short-term statistics Regulation (STS-R) 1165/98 calls for quarterly indices on construction costs for new residential buildings, excluding residences for communities. Data are revised when additional information from national statistical authorities becomes available. In general, no special surveys are undertaken in order to calculate the construction cost index since it is possible to use other indices that are already available from different sources.

The weighting for aggregating this index between Member States is generally turnover in building construction and is derived from information obtained from structural business statistics or other statistics.

Countries that do not have data on construction cost may use construction producer prices (construction output prices) as an approximation. Countries following this praxis are Belgium, Ireland, Croatia, Luxembourg, Poland, Slovakia and the United Kingdom. For some countries (the Czech Republic, Germany, Greece, the Netherlands and Austria) both indicators, construction costs and construction producer prices (construction output prices) are available. In general both indicators display almost the same developments.

Context

Figure 2: Construction cost index
Table 2: Sources for the construction cost index

The CCI provides important additional aspects to the information provided by other construction data. The CCI measures developments from the points of views of the building contractors. It reflects the prices that they have to pay for the input factors in the construction process (see A in Figure 2). The cost index therefore has to be distinguished from the producer price index for construction (also called output price index) which are seen from the point of view of the contractors' clients. The producer price index/output price index (see B) shows the development of prices paid by the client to the contractor. These two indices can be distinguished from the “selling price index” (item C) which measures changes in the prices paid by the final owner of the output to the client. It includes the price of the land, architect’s fees and client’s margins.

The CCI measures the relationship between the costs, at constant technology and constant input mix, that are associated with the implementation of a fixed amount of construction work. This type of index is different from a producer price index, which measures movements in prices charged to clients of construction work. This is especially true when the price index is calculated from tender prices, which can vary from time to time and place to place depending on the state of competition and market conditions. Producer price indices include changes both in productivity and in the contractor’s margins. This corresponds to item B in Figure 2.

The CCI is made up of aggregated price indices for materials, labour costs and other types of costs. The aggregation takes into account the relative weights for the different cost components. The component costs index (material costs and labour costs) shows the price developments of production factors used in the construction industry. Plant and equipment, transport, energy and other costs are also components of the construction costs. Architect’s fees are not part of the construction costs. The material costs index is generally calculated using materials prices and should be based on actual prices rather than list prices. They should also be based on a sample of products and suppliers. Prices are exclusive of VAT. The labour cost index for the construction sector should cover wages and salaries and social security charges for all persons employed in the construction sector. Social security charges include statutory social contributions payable by the employer as well as collectively agreed, contractual and voluntary social contributions payable by the employer and also imputed social contributions (social benefits paid directly by the employer). It is assumed that neither the construction method nor the building organisation have undergone any change, and consequently the calculations take no account of factors such as productivity improvements, more efficient utilisation of materials, etc. which may influence cost trends. Changes in the profit margins, which also affect a producer price index, have not been taken into account either. The coverage of this indicator is limited only by the Classification of types of construction (CC).

See also

Further Eurostat information

Publications

Main tables

Construction, building and civil engineering (NACE F) (t_sts_cons)

Database

Construction, building and civil engineering (sts_cons)
Construction cost (construction prices), new residential buildings (sts_cons_pri)

Dedicated section

Methodology / Metadata

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