2023.08.29
Building materials contribute to decline in inflation rate
Construction companies' costs for materials are no longer keeping pace with inflation. For certain product groups, we are at price levels not seen since before the pandemic. This is shown by the latest report from Statistics Sweden of the Construction Cost Index for apartment buildings.
Construction material costs for Sweden's construction contractors are now falling sharply and ended up at just over 0.9 percent on an annual basis (July 2022-July 2023). The costs of reinforcing steel, wood products and concrete products have fallen sharply - for reinforcing steel by a full 23 percent and for wood products by 20 percent.
Development for various building materials July 2022–July 2023 – Construction cost index for apartment buildings excluding VAT. The width of the bars corresponds to the weight share of the building material group in percentage of all building materials when calculating the Construction Cost Index for apartment buildings. The height of the bars corresponds to the average price development for each product group. Source: Statistics Sweden
White goods are going against the grain
Instead, prices are now rising for those product groups that are often contracted with index clauses that automatically increase supplier prices at the turn of the year or other agreed occasions. This includes, for example, white goods, which increased by 8.4 percent during the current 12-month period. Other such areas are plumbing materials (+11%), electrical materials (+8.5%) and carpentry (+7.5%). Since these existing index adjustments refer to historical price developments, they only take into account how prices have developed in the recent period – not how they will develop in the future.
In addition, there are more clouds of worry for construction companies. The rising interest rates have given developers an 82 percent increase in financing costs. In the interest rate area, it will probably be a while before we see any relief, according to the Riksbank. In Statistics Sweden's inflation report this August, interest rate increases are mentioned as a reason why Sweden continues to suffer from high inflation.
Text: Kent Oderud
