When it comes to the economy, it’s been predicted that things might get worse before they get better, though some niches may be more impacted than others — i.e., construction.

Good news, first. While early indications point to a slowing U.S. economy, the outlook for non-residential construction activity is positive with certain categories “charging ahead at a faster pace,” based on Mortenson’s Q3 Construction Cost Index Report. Additionally, Q3 data reflected a decrease in construction cost inflation across all markets — +0.8% in Q3 and +9.6% YOY — but that doesn’t mean the construction industry is out of the woods. Some metros, even less so than others.

Significant increases of pricing for specific materials persist in certain locations, based on the report, and labor challenges are still at play.

Costs for building materials like lumber and steel remain escalated due to related external factors such as continued increases in shipping costs, fuel surcharges, product lead times and material shortages, according to the data.  The Mortenson Cost Index reflects a single-quarter increase of 0.8% nationally and 1.2% in Chicago. In the last 12 months, costs increased 9.6% nationally and 10.8% in Chicago.

Building construction employment in Chicago totaled 29,800 in September 2022, according to Mortenson, which is 3% higher (1,000 jobs) compared to September 2021, but this will remain a challenge in 2023, especially with strong local activity.

On a broader scale, commodity prices have started to level off nationwide, but product lead times and material shortages continue to raise concern. Q3 continued to experience higher material shipping costs, even as fuel costs began to trend downward slightly in some markets.  

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