Highway Construction Costs Dropped 1.1% in Oct-Dec 2022 Quarter

After almost two years of explosive growth, the Federal Highway Administration’s metric of highway construction costs dipped in the fourth quarter of calendar year 2022 according to data released today.

FWHA’s National Highway Construction Cost Index (NHCCI) dropped to 2.763, a 1.1 percent drop from the all-time high in the previous quarter. However, costs are still up 48.5 percent from the level in the October-December 2020 quarter (when the NHCCI was just 1.860).

Digging into the data, a 3.1 percent drop in the cost of asphalt (due to declining oil prices) was somewhat offset by a 2.4 percent increase in the cost of grading and excavation (which is one of the more labor-intensive cost sectors, in a very tight job market).

By our reckoning, the result of the highway construction cost inflation in 2022 and 2023 has been to devalue the construction dollar to the point that FHWA has lost $24.1 billion in buying power, as shown in the calculations below. Obligation data is from usaspending.gov.

Total FHWA Obligations (Excluding Emergency Relief)

Nominal NHCCI “Real” Real Are
Obligations NHCCI Rebased to Obligations Less Than
Million $ Actual FY21 Q1 Million $ Nominal by:
FY21 Q1 4,506 1.8601 1.0000 4,506 0
FY21 Q2 9,859 1.9112 1.0274 9,596 -263
FY21 Q3 14,775 2.0363 1.0947 13,497 -1,278
FY21 Q4 23,238 2.1075 1.1330 20,510 -2,728
FY22 Q1 3,628 2.1821 1.1731 3,093 -535
FY22 Q2 8,490 2.2841 1.2279 6,914 -1,576
FY22 Q3 19,301 2.5555 1.3738 14,049 -5,252
FY22 Q4 31,279 2.7930 1.5015 20,832 -10,447
FY23 Q1 6,175 2.7628 1.4853 4,157 -2,018
TOTAL 121,252 97,154 -24,098

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