High Prices of Inputs in Construction Reduce Chances of Industry Recovery

According to IBGE, the national cost of the civil construction industry and inputs rose from R$ 1,252.10 per square meter in November to R$ 1,276.40 per square meter in December 2020

The National Civil Construction Industry Index (INCC/Sinapi), released on Tuesday, 12th, by the Brazilian Institute of Geography and Statistics (IBGE), increased by 1.94% regarding inputs in December, following a rise of 1.82% in November. The accumulated rate in 2020 was 10.16%, the highest in the historical series with the exemption of payroll taxes for companies in the sector, initiated in 2013.

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According to IBGE, the national cost of inputs in the civil construction industry rose from R$ 1,252.10 per square meter in November to R$ 1,276.40 per square meter in December. The share of materials increased by 3.39%, while the cost of labor rose by 0.25%.

Increase in Inputs Undermines Resumption of Construction

“The civil construction industry was greatly impacted, starting in July, by the sequential increases in input prices,” explains the survey manager, Augusto Oliveira.

On the other hand, the civil construction industry was negatively affected. Companies in the sector saw the prices of various basic inputs rise, such as cement and steel (used in rebar) and estimate that this increase could harm not only private real estate developments but also impact the cost of public works.

Imbalance in Civil Construction Contracts

“The increases have been surprising, and the consequence of this is very bad. It creates an imbalance in public works contracts, industrial contracts, real estate launches that are scheduled to take place, and those already underway. At a time when it is necessary to generate jobs, income, and drive the economy, this is a danger,” evaluates the president of the Union of the Civil Construction Industry of Espírito Santo (Sinduscon), Paulo Baraona.

He states that there is a shortage of material in the market, which, along with high demand, has driven prices up. This scarcity, according to Baraona, is caused by a cooling in the production of inputs like cement and steel, which began before the pandemic but has intensified since then.

Influenced by the significant increase in the share of materials, the Northeast region showed the highest regional variation in December (2.37%) and the highest accumulated result in 2020 (12.50%). In other regions, the results were: 1.75% (North), 1.69% (Southeast), 2.27% (South), and 1.35% (Central-West).