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Building cost index drops in 2nd quarter as construction hits bottom

Tuesday, June 2, 2009

Construction costs fell in the 2nd quarter, a sign of lower demand.
Construction costs fell in the 2nd quarter, a sign of lower demand.

In a sign that construction and the construction equipment industries still had room to fall, non-residential building costs in the U.S. decreased by 3.35 percent in the second quarter of the year, according to the Turner Building Cost Index.

The quarterly cost index, released yesterday by contractor Turner Construction Company, has decreased 8.92 percent from its peak in the second quarter of 2008.

Karl F. Almstead, a Turner vice president, said continuing reduction in construction starts and increased competition has caused construction costs in the commercial and institutional markets to decline.

"Commodity and material prices continue to drift downward in reaction to decreasing demand. Inventories and plant utilization rates have also declined," Almstead said.

Positive signs in the economy, including an upturn in the architecture billing index and an anticipated increase in federal public sector spending, provide optimism in the construction industry, he added.

Used widely by the construction industry and Federal and State governments, the building costs and price trends tracked by the Turner Building Cost Index may or may not reflect regional conditions in any given quarter, Turner Construction said.

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